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dc.contributor.authorMartin, Antoineen_US
dc.contributor.authorOrlando, Michael J.en_US
dc.date.accessioned2012-08-17T14:29:23Z-
dc.date.available2012-08-17T14:29:23Z-
dc.date.issued2005en_US
dc.identifier.urihttp://hdl.handle.net/10419/60717-
dc.description.abstractWe examine incentives for network-specific investment and the implications for network governance. We model an environment in which participants that make payments over a network can invest in a technology that reduces the marginal cost of using the network. A network effect results in multiple equilibria; either all agents invest and network usage is high or no agents invest and network usage is low. When commitment is feasible, the high-use equilibrium can be implemented; however, when commitment is infeasible, fixed costs associated with use of the network-specific technology result in a holdup problem that implements the low-investment equilibrium. Thus, governance structures necessary to achieve commitment will be preferred to those necessary merely to achieve coordination. For example, mutual ownership by network users may emerge where users face risk of ex post renegotiation. Such a governance structure will also be sufficient to avoid the network effect.en_US
dc.language.isoengen_US
dc.publisherFederal Reserve Bank of New York New York, NYen_US
dc.relation.ispartofseriesStaff Report, Federal Reserve Bank of New York 221en_US
dc.subject.jelL14en_US
dc.subject.jelE59en_US
dc.subject.jelF29en_US
dc.subject.ddc330en_US
dc.subject.keywordholdup, network, commitment, paymentsen_US
dc.subject.stwNetzeffekten_US
dc.subject.stwMonopolen_US
dc.subject.stwInvestitionen_US
dc.subject.stwTheorieen_US
dc.titleBarriers to network-specific innovationen_US
dc.typeWorking Paperen_US
dc.identifier.ppn500373744en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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