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http://hdl.handle.net/10419/24176
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| Title: | | Network Externalities and Interconnection Incentives  |
| Authors: | | Vanberg, Margit A. |
| Issue Date: | | 2005 |
| Series/Report no.: | | ZEW Discussion Papers 05-80 |
| Abstract: | | The majority of industrial organizations literature on network externalities looks at firm behavior under given market characteristics. The present paper instead asks the question whether the presence of network externalities can change market characteristics, specifically, whether an initially large market player can decline cooperation (interconnection) with competing network operators and thereby gain a dominant position when network externalities are significant. The paper comes to the conclusion that only when a network operator already has network specific market power due to the ownership of a monopolistic bottleneck network area, will network externalities enable the operator to increase his market dominance. In competitive markets or in contestable natural monopolies, however, network externalities will not lend network specific market power to an initially large operator. In these markets, the market process can be expected to solve the trade-off between ensuring cooperation between competing operators and at the same time safeguarding competition in product characteristics and quality of service. |
| Subjects: | | network externalities interconnection regulation |
| JEL: | | L43 L15 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des ZEW ZEW Discussion Papers
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