Ft 5 pa pc buys A and C ft pB pC buys B and C 0Otherwise

This utility function is motivated by the observation that some consumers do not switch among phone companies even when there is a change in the relative price of phone services. This behavior occurs when consumers develop loyalty toward one telephone company, or because one telephone company offers a bundling package that suits a particular preference of a particular consumer. A second assumption imbedded in the utility function (6.8) is that phone and Internet services are perfect...

The Hardware Industry

2.2 The Network Externalities Approach 16 2.2.1 Monopoly selling a single brand to identical consumers 2.2.2 Monopoly selling a single brand to heterogeneous consumers 2.2.3 Duopoly selling differentiated brands to heterogeneous consumers 2.2.4 Summary of the network externalities approach 2.3.3 Compatibility versus incompatibility 2.3.4 Summary of the components approach 2.4 Empirical Findings on Network Externalities 43 2.4.1 Keyboard compatibility and network externalities 2.4.3 Network...

Software piracy

Givon, Mahajan, and Muller (1995) suggest a modeling approach to track legal and illegal diffusion of software in order to estimate the pirated adoptions over time and the percentage of legal adoptions due to the influence of pirates. Their study focused on two popular types of software (spreadsheets and word processors) in England. The major difficulty of such a study is that even if one has data on the number of microcomputers and the legal adoption of software, still one cannot assume that...

Selected References

Warren-Boulton, and G. Woroch. 1995. Microsoft Plays Hardball The Use of Exclusionary Pricing and Technological Incompatibility to Maintain Monopoly Power in Markets for Operating systems. Antitrust Bulletin 40 265-315. Bresnahan, T., and S. Greenstein. 1997. Technical Progress and Co-Invention in the Computing and in the Use of Computers. Brookings Papers on Economics Activity Microeconomics 1-78. Bresnahan, T., and S. Greenstein. 1999. Technological Competition and the...

Cable TV The effect of local monopolies

Cable TV became most popular in the early 1980s when extensive wiring of private houses took place in the United States and Europe. Unlike TV stations which broadcasted via the airwaves and earned their profit from advertising and public money, cable TV operators rely on direct fees imposed on subscribers for transmitting a bundle of TV stations to their homes. The guiding principle of regulators in providing licenses to cable-TV operators was that wiring houses requires an expensive investment...

Uij h fPj V 5 if purchasing system Yj 230

3 - PX Pj - 5 if purchasing system XiYi 3 - pX Pi - 25 if purchasing system XjY . Thus, in this simple model each consumer has a different ideal system under equal prices . The utility function 2.30 shows that a consumer purchasing his ideal system gains a gross utility level of 3. If the system he buys has one component from his ideal system and one component from his less preferred system, his gross utility level is reduced by 5. A consumer who purchases a system in which both components are...