Error message

Deprecated function: Array and string offset access syntax with curly braces is deprecated in include_once() (line 20 of /mnt/web104/a0/07/510451407/htdocs/includes/file.phar.inc).

Does the Absence of Competition in the Market Foster Competition for the Market? A Dynamic Approach to Aftermarkets

Printer-friendly version
Working paper
Author/s: 
Didier Laussel and Joana Resende
Issue number: 
2008/33
Publisher: 
Interuniversity Poles of Attraction
Year: 
2008
In this paper, we investigate dynamic price competition when firms strategically interact in two distinct but interrelated markets: a primary market and an aftermarket, where indirect network effects arise. We set up a differential game of two-dimensional price competition and we conclude that the absence of price competition in the aftermarket (competition in the market) fosters dynamic price competition in the primary market (competition for the market). We also investigate the impact of network sizes on firms' prices in the primary market concluding that, in equilibrium, larger firms have incentives to compete more fiercely for new "uncolonized" consumers.
Developed by Paolo Gittoi