Critical Mass and Tariff Structure in Electronic Communications Markets

Shmuel S. Oren · Stephen A. Smith

159 citations0/0 files storedThe Bell Journal of Economics

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Digital Platforms and Economics ICT Impact and Policies Innovation Diffusion and Forecasting

Abstract

Most communication services have a demand "externality" in that the benefit to a subscriber depends upon how many of his communication partners also subscribe. This article develops an economic model that determines both the required critical mass size for startup and the ultimate expansion level of such a system. The effects of different pricing structures for the service are evaluated under the assumption that users maximize benefits minus cost and a monopoly supplier maximizes profit.

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2011A Short Survey of Network Economics 2006Network externalities and market segmentation in a monopoly 1985Optimal Dynamic Pricing For Expanding Networks 1983Competitive nonlinear tariffs 1995Network Competition, Product Quality, and Market Coverage in the Presence of Network Externalities 2013Game Theory and Business Applications 1997Snobs, bandwagons, and the origin of social customs in consumer behavior 2014The impacts of information technology on total factor productivity: A look at externalities and innovations

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