Network externalities and their influence on market perception
DOI:
https://doi.org/10.29201/peipn.v5i9.318Keywords:
Network effects, externalities, market coverage, positioningAbstract
Nowadays, businesses have experienced a new dynamic of expansion together with the need of a positioning strategy that has to do with either the concept, the brand, the product or a combination of them. By using a location model and a two stage game we measure in several different competition scenarios the externalities generated by the effects of the presence of a network of branches or selling points, for both the consumers and the firms, taking into account that both look for the maximization of their utilities and profits respectively. The results from the model show that market coverage has an effect over variables such as perceived quality, price, utility and profits. And at the same time these situations affect the level of competition under the presence of rival firms.
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