Barriers to network-specific innovation
By: Antoine Martin and Michael J. Orlando.
Contributors: Orlando, Michael, 1966-; Federal Reserve Bank of Kansas City. Research Division.
Series: RWP ;; 04-11; Research working paper (Federal Reserve Bank of Kansas City : Online) ;; 04-11.
Publisher: Federal Reserve Bank of Kansas City
Published: 2004
Place of publication: Kansas City [Mo.]
Language: eng
Format: Electronic resource
Subjects: Computer networks -- Economic aspects -- Mathematical models.
Description: "We consider an environment in which participants make payments over a network and can invest in a technology that reduces the marginal cost of using the network.  A network effect results in multiple equilibria; either all agents invest and usage of the network is high or no agents invest and usage of the network is low.  The high-usage equilibrium can be implemented through introduction of a coordinator.  Under monopoly network ownership, however, fixed costs associated with use of the network-specific technology result in a hold-up problem that implements the low-investment equilibrium.  And even where subsidies can avoid such hold-up, optimal monopoly pricing of network usage may avoid investment in the network-specific technology if demand for on-network transactions is sufficiently inelastic"--Federal Reserve Bank of Kansas City web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 11/19/2004.
Also available in print.
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Mode of access: World Wide Web.