Firm Discrimination Pricing Strategies with Network Effect
We explore the price and welfare effect of price discrimination in a differentiated-goods oligopoly market with network effect and the effect of network effect on the equilibrium price, profit and output. We show that competitive price discrimination and network effect may intensify competition and the price discrimination increases the social welfare under oligopoly market with network effect. If firms differ in which markets they target for aggressive pricing strategy and competitive firm’s reaction is strong, prices in all markets may fall. So both firms agree on the strategies of setting the uniform pricing.
Chengyu Jiang, Geng Liu, Dinghua Zhang and Xipeng Xu
X. J. Pan et al., "Firm Discrimination Pricing Strategies with Network Effect", Materials Science Forum, Vols. 532-533, pp. 941-944, 2006