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Thematic clubs and the supremacy of network externalities

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Amir, Rabah [University of Iowa] Resende, Joana [University of Porto] Jaskold Gabszewicz, Jean [UCL]

We explore the issue of minorities' survival in the presence of positive network externalities. We rely on a simple example of thematic clubs to illustrate why and how such survival problems might appear, first considering the case of simple-network effects (fully anonymous externalities) and then the case of cross-network effects (type-dependent externalities). In both cases, the analysis is framed as a simple noncooperative game with a continuum of players and binary action sets. There is a unique and interior Nash equilibrium under mild network effects and two corner equilibria under strong network effects, with one club driven out. A utilitarian planner would accentuate the clustering effects of network externalities, and call for the disappearance of the minority club more often than the noncooperative solution. A simple myopic learning algorithm capturing the progression of network lock-in effects is studied. © 2013 Wiley Periodicals, Inc.

Document type Article de périodique (Journal article) – Article de recherche
Access type Accès restreint
Publication date 2014
Language Anglais
Journal information "Journal of Public Economic Theory" - Vol. 16, no. 5, p. 706-729 (2014)
Peer reviewed yes
Publisher Wiley-Blackwell Publishing, Inc.
e-issn 1467-9779
issn 1097-3923
Publication status Publié
Affiliation UCL - Autre
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Bibliographic reference Amir, Rabah ; Resende, Joana ; Jaskold Gabszewicz, Jean. Thematic clubs and the supremacy of network externalities. In: Journal of Public Economic Theory, Vol. 16, no. 5, p. 706-729 (2014)
Permanent URL http://hdl.handle.net/2078.1/159498