This paper investigates how call and network externalities affect a monopolist’s optimal nonlinear pricing of a two-way telecommunication service. The existence of call externalities results in all types of subscribers (even the highest type) making suboptimal quantities of calls in the...

This note examines firms’ strategic choices between leasing and selling in a market for horizontally differentiated durable goods. Firms’ decisions on marketing strategies may lead to socially inefficient outcomes. Moreover, a prisoners’ dilemma-type situation may arise.

This paper considers competition in a telecommunications industry, where heterogeneous consumers have private information about their preferences for telephone service and firms are allowed to use nonlinear tariffs. Networks, which directly compete for customers, are interconnected and pay...

This paper considers a functional quality degradation of software with twoway features (such as reading and writing in word-processors). A software monopolist differentiates products by introducing a functionally down-graded version (e.g. the read-only version) by eliminating some functions of...

This paper examines how the presence of network externalities affects a monopolist’s incentive for quality degradation and its welfare consequence. The software and the Internet service industries provide our primary motivation. The network externality may lead to a Pareto-improving quality...

This paper extends the standard monopoly quality differentiation model by Mussa and Rosen (1978) to an environment where the production of a (qualitydifferentiated) product-line involves initial fixed investments in common assets such as production facilities or R&D. The fixed cost depends...

This paper examines how a durable-goods monopolist’s choice of product quality interacts with time inconsistency problems in an environment, where the firm faces an irreversible decision on quality and unit production costs increase in quality. The monopolist may have incentives to choose a...