Consumers benefit as new entrants challenge network industry monopolies.
This paper explores how new companies enter industries where networks are important. The new company wants to attract customers from the existing company, but customers tend to stick with what they know. Eventually, customers all decide on one company, which becomes the only choice. The outcome depends on how the companies set their prices. If the existing company lowers its prices a lot, it can keep out the new company. But if the new company can offer lower prices, it can succeed. This competition can be good for customers, even if it hurts efficiency. Making sure different networks can work together is good for everyone, as it stops the existing company from keeping out new competition.