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on Network Economics |
| By: | L. Lambertini; R. Orsini |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:471&r=net |
| By: | Gerard Llobet (CEMFI); Michael Manove (Boston University, Department of Economics) |
| Abstract: | Most types of networks, over time, spawn the creation of complementary stocks that enhance network value. Computer operating systems, for example, induce the development of the comple- mentary stock of software applications that increase the value of the operating system. In this paper, we challenge the conventional wisdom that a large network, which induces the creation of large complementary stocks, serves as a barrier to entry that protects the incumbent from competi- tion or network capture. We show that a larger network may either deter or attract entry depending on the relation between the network quality and the cost of an innovator?s network product. The probability of entry also depends on the level of compatibility between the potential entrant?s technology and existing complementary stocks, which in turn is in?uenced by the strength of the intellectual-property-rights environment. Intellectual property rights and the associated threat of entry may a¤ect an incumbent?s choice of network size in counterintuitive ways. |
| JEL: | L41 O34 |
| Date: | 2002–12 |
| URL: | http://d.repec.org/n?u=RePEc:bos:wpaper:wp2006-007&r=net |
| By: | Marc Rysman (Department of Economics, Boston University); |
| Abstract: | This paper exploits a unique data set on the payment card industry to study issues associated with network effects and two-sided markets. We show that consumers concentrate their spending on a single payment network (single-homing), although many maintain unused cards that allow the ability to use multiple networks (multi-homing). Further, we establish a regional correlation between consumer usage and merchant acceptance within the four major networks (Visa, Mastercard, American Express and Discover). This correlation is suggestive of the existence of a positive feedback loop between consumer usage and merchant acceptance. |
| Keywords: | payment cards, two-sided markets, network effects |
| JEL: | L14 L80 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:bos:wpaper:wp2006-002&r=net |