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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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