We study the effect of entry on costs and competition in the Portuguese mobile telephony industry. We construct and estimate a model that includes demand, network, and cost equations. The latter accounts for inefficiency and cost reducing effort. We show that failure to account for cost reducing...

We develop a general theoretical framework of trade on a platform on which buyers and sellers interact. The platform may be owned by a single large, or many small independent or vertically integrated intermediaries. There also may be free entry into the market for platform slots, or platform...

I consider a dynamic model of competition between two proprietary networks. Consumers die and are replaced with a constant hazard rate. Firms compete for new consumers to join their network by offering network entry prices (which may be below cost). New consumers have a privately known...

Two important welfare implications of network effects are that (1) market forces often result in suboptimal standardization, that is, left alone the market may fail to achieve standardization when it is socially desirable and (2) even if the market settles on a standard, the chosen standard may...

In April 1997, a consortium of hardware manufacturers and movie studios launched the DVD format. By that fall, electronics retailing giant Circuit City announced its intentions to launch a partially incompatible format known as DIVX. This Paper assesses Circuit City’s strategy to establish the...

We analyze whether and how the fact that products are not sold on open or public platforms but on competing for-profit platforms affects sellers’ investment incentives. Investments in cost reduction, quality, or marketing measures are here the joint and coordinated efforts by sellers. We show...

This Paper examines irreversible investment in a project with uncertain returns, when there is an advantage to being the first to invest, and externalities to investing when others also do so. Pre-emption decreases and may even eliminate the option values created by irreversibility and...

Using two standard location models, we investigate price competition and divergence from optimal product differentiation when consumer preferences are influenced by the number of consumers purchasing the same brand or shopping at the same store. Negative network effects tend to lessen...

Text messaging has become an important revenue component for European and Asian mobile operators. We develop a simple model of demand for mobile services incorporating the existence of call externalities and network effects. We show that when incoming messages and calls stimulate outgoing...

In this paper, we examine how software vulnerabilities affect firms that license software and consumers that purchase software. In particular, we model three decisions of the firm: (i) an upfront investment in the quality of the software to reduce potential vulnerabilities; (ii) a policy...