Network Goods Duopoly Upends Profit Expectations, Traps Firms in Prisoner's Dilemma
In a study about competing network goods, researchers found that when companies sell products with strong network effects and similar alternatives, each company makes more money by setting prices rather than quantities. When deciding between price and quantity strategies, the firms often end up with outcomes that are not the best for everyone because they act in their own interests. This finding is opposite to what is seen in non-network product competitions.