Suppose that consumer utility is given by U₁ = v₁ - p + an common sensitivity to network effects Suppose that platform has zero costs where u, U[0, 1]- a uniformly distributed consumer valuation, a and 0 ≤ n ≤ 1 is the number of consumers joining the platform. of serving consumers. Assume that consumers' outside option is 0. Now consumers simultaneously decide whether to join the platform... 1. Show that both full participation and zero participation equilibria can co-exist only if a > p > 1. 2. Show that interior, i.e. partial participation, equilibrium can only exist if a < 1. What is the price in this equilibrium?

Suppose that consumer utility is given by U₁ = v₁ - p + an common sensitivity to network effects Suppose that platform has zero costs where u, U[0, 1]- a uniformly distributed consumer valuation, a and 0 ≤ n ≤ 1 is the number of consumers joining the platform. of serving consumers. Assume that consumers' outside option is 0. Now consumers simultaneously decide whether to join the platform... 1. Show that both full participation and zero participation equilibria can co-exist only if a > p > 1. 2. Show that interior, i.e. partial participation, equilibrium can only exist if a < 1. What is the price in this equilibrium?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.7P

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