Dynamic price competition in aftermarkets with network effects

• Type: Article in International Scientific Journal
• Date: 2014

Authors

Didier Laussel (Author) Other; Joana Resende (Author) FEP

Journal

Title: Journal of Mathematical Economics

Vol. 50

Pages: 106-118

ISSN: 0304-4068

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 16 Citations

ISI Web of Science

Scopus - 16 Citations

Econlit

Scientific classification

FOS: Social sciences > Economics and Business

Other information

Authenticus ID: P-009-7AE

DOI: 10.1016/j.jmateco.2013.10.002

Abstract (EN): This paper studies the dynamic price competition between two firms that sell horizontally differentiated durable goods and, subsequently, provide exclusive complementary goods and services to their customers. The paper analyzes how optimal pricing strategies are affected by the existence of network effects associated with the size of firms' consumer base. The interaction is thoroughly analyzed as a continuous time linear-quadratic differential game. We provide a necessary and sufficient condition for the existence of a unique duopoly equilibrium in affine strategies. When this condition holds, we show that optimal pricing strategies crucially depend on the nature of the network effects.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 13