In a setting with Hotelling differentiation and weak network effects: When the market is already covered, duopoly adoption of compatibility leads to a price increase, can reduce user surplus and thus tends to be welfare-reducing. We show that this welfare result can be reversed if the market is not covered under incompatibility.
Bertoletti, P. (In corso di stampa). On the welfare effects of compatibility with Hotelling competition: the role of market coverage. REVIEW OF INDUSTRIAL ORGANIZATION.
On the welfare effects of compatibility with Hotelling competition: the role of market coverage
Bertoletti, P
Primo
In corso di stampa
Abstract
In a setting with Hotelling differentiation and weak network effects: When the market is already covered, duopoly adoption of compatibility leads to a price increase, can reduce user surplus and thus tends to be welfare-reducing. We show that this welfare result can be reversed if the market is not covered under incompatibility.
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