Network Effects Lead to Monopoly Creation in Competitive Industries
This study looks at how two companies compete in a market with Network Externalities, where the effectiveness of advertising depends on market share. The research shows that Network Externalities can impact marketing decisions, making it easier for a firm to become a monopoly if it is large enough. By analyzing optimal strategies and running simulations, the study finds that the value of market share compared to advertising costs is crucial for long-term market equilibrium.