Network competition with consumer switching costs: a model for the telecommunication sector
Faculty of Applied Economics
Antwerpen , 2000
Research paper / Faculty of Applied Economics UFSIA-RUCA ; 2000:016
University of Antwerp
This paper gives a model for price competition under consumer switching costs in a network setting with interconnection charges. This simultaneous analysis is conducted in a discrete choice model with a multinomial logit di¤erentiation for the customers and not in a traditional Hotelling framework. Analytical equilibrium results are derived for duopoly competition between identical rms with both homogeneous and heterogeneous customers. A numerical method was used to study the e¤ects of having di¤erent installed bases and to allow for the introduction of market growth.