Vanity and Congestion: A Study of Reciprocal Externalities.
This paper models a private goods oligopoly market characterized by negative and reciprocal externalities. Although firms compete in prices and products are undifferentiated in equilibrium, the price-cost margin turns out to be positive. From a social perspective, the equilibrium price is higher than what is motivated by the negative externality. Hence, welfare can be improved by means of a price ceiling. Finally, industries with high fixed costs would be expected to exhibit a high degree of concentration on the supply side and considerable price-cost margins. Copyright 1996 by The London School of Economics and Political Science.
Year of publication: |
1996
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Authors: | Hackner, Jonas ; Nyberg, Sten |
Published in: |
Economica. - London School of Economics (LSE). - Vol. 63.1996, 249, p. 97-111
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Publisher: |
London School of Economics (LSE) |
Saved in:
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