Network Externalities and Interconnection Incentives


Vanberg, Margit A.


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URL: http://ub-madoc.bib.uni-mannheim.de/1197
URN: urn:nbn:de:bsz:180-madoc-11972
Document Type: Working paper
Year of publication: 2005
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: L15; L43 ,
Subject headings (SWD): Netzwerk , Regulation , Monopol
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.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Vanberg, Margit A. (2005) Network Externalities and Interconnection Incentives. Open Access [Working paper]
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