Journal
AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
Volume 12, Issue 4, Pages 229-269Publisher
AMER ECONOMIC ASSOC
DOI: 10.1257/mic.20180225
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Funding
- Agence Nationale de la Recherche Scientifique [ANR-10-BLAN-1802-01]
- Jean-Jacques Laffont Digital Chair at the Toulouse School of Economics
- European Research Council (ERC) under the European Union's Horizon 2020 research and -nnovation programme [670494]
- Agence Nationale de la Recherche (ANR) [ANR-10-BLAN-1802] Funding Source: Agence Nationale de la Recherche (ANR)
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We study competition for the market in a dynamic model with network externalities, focusing on the efficiency of market outcomes. We propose a representation of the strategic advantages of incumbency and embed it in a dynamic framework with heterogeneous consumers. Then, we completely identify the conditions under which inefficient equilibria with several platforms emerge at equilibrium; explore the reasons why these inefficient equilibria arise; and compute the value of incumbency and analyze why static models generally exaggerate it.
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