The existence of a pure-strategy subgame perfect equilibrium in qualities and prices is investigated in a duopoly model of vertical differentiation where quality improvements require a quadratic variable cost and network externalities appears in consumer utility. Full market coverage is assumed....

We describe the behaviour of a monopolist supplying a vertically differentiated good with network externalities. Assuming a fixed cost of quality improvements we show that the presence of network externalities enhances the incentive to expand output associated with scale economies. Although the...

We analyse product and process innovations in a monopoly model with vertical differentiation. The incentive towards both kinds of innovation is always larger under social planning than under monopoly. Therefore, the comparison between the two regimes` welfare performance should account for the...

We show that Rholfs's (1974) model is a special case of a spatial monopoly model à la Hotelling (1929) with quadratic transportation costs, where location is exogenous and the good yealds no intrinsic utility. By relaxing these assumptions, we prove that the coordination problem typically...

We investigate the bearings of network externalities on product quality improvements requiring costly R&D investments. The model considers the dynamic behaviour of a monopolist alternatively maximising profits or social welfare. On the one hand, we confirm much of the acquired wisdom from the...

We investigate the optimal R&D portfolio of a single-product monopolist investing in cost-reducing activities accompanied by efforts improving the quality of its product. There emerges that the firm's relative incentives along the two directions are conditional upon market affluency, measured by...