A column in the Washington Post argues that network externalities turn market forces on their head. Consider

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A column in the Washington Post argues that “network externalities turn market forces on their head.” Consider two new products—product A and product B—neither of which receives patent protection. Assume that there are no network externalities when consumers use product A, whereas there are very large network externalities when consumers use product B. Briefly explain how market forces will determine the level of competition in equilibrium in industry A and in industry B.

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Economics

ISBN: 9780135957554

8th Edition

Authors: Glenn Hubbard, Anthony Patrick O Brien

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