Social efficiency of entry: implications of network externalities

Basak, Debasmita; Petrakis, Emmanuel

Abstract

We examine the welfare effects of entry in the presence of network externalities. We show that if network goods are fully incompatible, entry is socially insufficient as long as the entry cost is high, the goods are sufficiently differentiated, and the degree of network externality is low. Further, we show that as the degree of compatibility between the network goods increases, insufficient entry becomes more likely. Our findings provide policy guidelines for anticompetitive and procompetitive entry regulations.

Citation

Basak, D., & Petrakis, E. (2021). Social efficiency of entry: implications of network externalities. Journal of Economics and Management Strategy, 30(4), 820-829. https://doi.org/10.1111/jems.12431

• Journal Article Type: Article
• Acceptance Date: May 10, 2021
• Online Publication Date: May 27, 2021
• Publication Date: 2021-12
• Deposit Date: May 13, 2021
• Publicly Available Date: May 28, 2023
• Journal: Journal of Economics and Management Strategy
• Print ISSN: 1058-6407
• Peer Reviewed: Peer Reviewed
• Volume: 30
• Issue: 4
• Pages: 820-829
• DOI: https://doi.org/10.1111/jems.12431
• Keywords: Excess entry; Insufficient entry; Network externalities
• Public URL: https://nottingham-repository.worktribe.com/output/5527445
• Publisher URL: https://onlinelibrary.wiley.com/doi/full/10.1111/jems.12431