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Influence of strategic consumers on the network goods market
 
PIIS042473880017514-4-1
DOI10.31857/S042473880017514-4
Publication type Article
Status Published
Authors
Nikolai Svetlov 
Occupation: Leading Researcher
Affiliation:
Laboratory of financial and industrial integration mechanisms
Central Economics and Mathematics Institute of Russian Academy of Science
Address: Moscow, Nakhimovsky prospekt, 47
Victor Dementiev
Occupation: Scientific concept adviser
Affiliation: Central Economics and Mathematics Institute of Russian Academy of Sciences (CEMI RAS)
Address: Russian Federation, Moscow, Nakhimovky prospect 47
Journal nameEkonomika i matematicheskie metody
EditionVolume 57 Issue 4
Pages5-16
Abstract

One of the important trends in modern economic development is the expanding variety ofso-called network commodities. Network commodity is such a good the usefulness of which for each consumer depends on the total number of using it consumers. The purpose of the paper is to study dynamic pricing in the network commodity market with a positive network effect in the presence of two types of consumers: myopic, taking into account only the current utility of the commodity, and strategic, focused on utility for the entire period of use of the commodity. Market dynamics, including price trajectories maximizing the monopolist supplier's revenues, are established by running numerical experiments on the corresponding theoretical model. The features of this dynamics are revealed for the cases of a large share of myopic consumers and under the conditions of dominance of strategic consumers. It is demonstrated that, in contrast to the situation in the market of ordinary commodities, a monopoly supplier of the network commodity may be interested in the presence of strategic consumers in the market. The more such consumers are present, the shorter the period of warming up the market by the supplier by means of low prices and the higher the rate of the consequent price growth. Strategic consumers find themselves hostage of their own focus on the integral effect in consumption. The directions of further research of the market of network commodities with the heterogeneous consumers are presented.

Keywordsmarket dynamics, network effect, monopoly, market warmup, strategic consumer, myopic consumer, numerical experiment.
Received17.11.2021
Publication date13.12.2021
Number of characters32241
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