Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/260847 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9717
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We examine tippy network markets that accommodate price discrimination. The analysis shows that when a mild equilibrium refinement, the monotonicity criterion, is adopted, network competition may have a unique subgame-perfect equilibrium regarding the winner’s identity; the prevailing brand may be fully determined by its product features. We bring out the concept of the dominant value margin, which is a metric of the effectiveness of divide-and-conquer strategies. The supplier with the larger dominant value margin may always sell to all customers in equilibrium. Such a market outcome is not always socially efficient since a socially inferior supplier may prevail if has a stand-alone-benefit advantage and only a modest network-benefit disadvantage.
Subjects: 
network externalities
equilibrium uniqueness
price discrimination
monotonicity criterion
dominant value margin
divide and conquer
JEL: 
L13
L40
D43
Document Type: 
Working Paper
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