*We thank Mark Armstrong, Paul Belleflamme, Jay Pil Choi, Martin Diedrich, Georg Goetz, Bruno Jullien, Paul Klemperer, Meg Meyer, Marco Ottaviani, Patrick Rey, Jean Tirole, Tim Worrall, and seminar participants at various places for useful comments on earlier versions of the paper. We are especially grateful to the editor and two anonymous referees for insightful comments and suggestions.
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FUNCTIONAL DEGRADATION AND ASYMMETRIC NETWORK EFFECTS†
Article first published online: 6 JUN 2006
DOI: 10.1111/j.1467-6451.2006.00282.x
Additional Information
How to Cite
CSORBA, G. and HAHN, J.-H. (2006), FUNCTIONAL DEGRADATION AND ASYMMETRIC NETWORK EFFECTS. The Journal of Industrial Economics, 54: 253–268. doi: 10.1111/j.1467-6451.2006.00282.x
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Publication History
- Issue published online: 6 JUN 2006
- Article first published online: 6 JUN 2006
- Abstract
- References
- Cited By
In markets subject to network effects, firms often remove some functions of their original products and sell a functionally-downgraded version at a lower or zero price. This paper aims to provide a pure network effect based explanation of such a practice. Building a functional degradation model with asymmetric network effects, we investigate when and why firms have incentives to introduce a functionally-degraded good and discuss its welfare implication.