I develop a general theory of monopoly pricing of networks. Platforms use insulating tariffs to avoid coordination failure, implementing any desired allocation. Profit maximization distorts in the spirit of A. Michael Spence (1975) by internalizing only network externalities to marginal users....

One of the most salient issues faced by platforms like newspapers and credit card issuers is that users are heterogeneous in the value they bring to other users or to the platform. We develop a model with multi-dimensional heterogeneity where a monopoly platform chooses (price or non-price)...

Abstract I model dynamic product design along price and non-price dimensions by a firm in a market with positive network externalities between consumers. In the case of a usage fee, I provide conditions under which the steady state (SS) is unique and show that the introductory price is negative...

Payment card networks, such as Visa, require merchants' banks to pay substantial "interchange" fees to cardholders' banks, on a per transaction basis. This paper shows that a network's profit-maximizing fee induces an inefficient price structure, over-subsidizing card usage and over-taxing...

This paper investigates pricing decisions and network choices in two-sided markets with network externalities. Consumers are heterogeneous in how much they value the externality. Imposing restrictions on the extent of coordination failure among consumers generates clear qualitative conclusions...

We study the efficient allocation of buyers in the presence of recommender systems. A recommender system affects the market in two ways: (i) it creates value by reducing product uncertainty for the customers and hence (ii) its recommendations can be offered as add-ons, which generates...

We study optimal pricing in the presence of recommender systems. A recommender system affects the market in two ways: (i) it creates value by reducing product uncertainty for the customers and hence (ii) its recommendations can be offered as add-ons which generate informational externalities....

The paper studies the impact of homophily on the optimal strategies of a monopolist, whose marketing campaign of new product relies on a word of mouth communication. Homophily is a tendency of people to interact more with those who are similar to them. In the model there are two types of...

The paper explores the role of R&D investments reducing fixed production costs in entry deterrence. An incumbent monopolist and a potential entrant can perform R&D to reduce their fixed production costs, with bidirectional and asymmetric technological spillovers. It is shown that deterrence,...

Arrow (1962) argued that since a monopoly restricts output relative to a competitive industry, it would be less willing to pay a fixed cost to adopt a new technology. We develop a new theory of why a monopolistic industry innovates less. Firms often face major problems in integrating new...