Firms' strategic choices shape market dynamics, impacting consumers
The article explores how companies in a competitive market decide between setting prices or quantities of their products. They focus on how network effects and product compatibility influence these decisions. The researchers found that when one company's products are more compatible with others than they are substitutes, it's better to choose quantity over price. This leads to a specific type of market equilibrium. Additionally, if one company's products have stronger network effects than substitutes, they should choose quantity over price, resulting in a different type of equilibrium.