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Optimal Monopoly Price Paths with Expanding Networks

The Review of Network Economics

Vol. 6, Issue 1 - March 2007, pp 42 - 49

  Jean Gabszewicz
CORE - Université Catholique de Louvain

Filomena Garcia.

ISEG/Technical University of Lisbon and UECE
E-mail: [email protected]

  In this paper, we survey the literature on optimal pricing of a monopolist operating on a network industry. We also describe explicitly the optimal path of prices for a monopolist facing an expanding demand due to the presence of network effects. The optimal path of prices appears as a function of the network effect intensity and horizon length. Prices are increasing over time and for very low network effect intensity, or very high horizon length, the monopolist will offer the good at zero price in the initial period.

Keywords: Network externalities, monopoly, pricing, dynamics

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