Please use this identifier to cite or link to this item: http://hdl.handle.net/2440/28341
Type: Conference paper
Title: Network externalities, demand inertia, and dynamic pricing in an experimental oligopoly market
Author: Bayer, R.
Chan, C.
Citation: Proceedings of the Australasian Meeting of the Econometric Society 2004, 2004 / McLaren, K., Poskitt, D. (ed./s), pp.www 1-www 30
Publisher: Econometric Society
Publisher Place: http://ideas.repec.org/p/ecm/ausm04/108.html
Issue Date: 2004
Conference Name: Australasian Meeting of the Econometric Society (07 Jul 2004 : Melbourne, Australia)
Abstract: This paper analyses dynamic pricing in markets with network externalities. Network externalities imply demand inertia, because the size of a network increases the usefulness of the product for consumers. Since past sales increase current demand, firms have an incentive to set low introductory prices to be able to increase prices as their networks grow. However, in reality we observe decreasing prices. This could be due to other factors dominating the network e¤ects. We use an experimental duopoly market with demand inertia to isolate the effect of network externalities. We find that experimental price dynamics are rather consistent with real world observations than with theoretical predictions.
RMID: 0020041643
Published version: https://editorialexpress.com/conference/ESAM04/program/ESAM04.html
Appears in Collections:Economics publications

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