Network Investments Under Different Consumer Expectations and Competition Modes

This study examines the impacts of consumer environmental awareness on green R&D subsidy policies under different market competition modes when firms adopt green strategies for emissions-reduction activities. We demonstrate that governments grant fewer subsidies to Cournot firms than Bertrand firms. Thus, Cournot firms produce lower outputs and invest less in green R&D. However, firms’ profits and social welfare are higher (lower) in Cournot than in Bertrand firms if the product substitutability is high (low). We also investigate an endogenous competition mode game and find that a Cournot (Bertrand) competition is a socially desirable equilibrium when products substitutability is relatively high (low) while consumer environmental awareness is not sufficiently high (low). These findings suggest that through appropriate green subsidies, antitrust authorities should monitor not only consumer environmental awareness but also firms’ competition mode coordination.

This paper provides a new and simple model of endogenous horizontal product differentiation based on a standard demand structure derived from quadratic utility. One objective of the paper is to explain the “empirical Bertrand paradox” – the failure to observe homogeneous product Bertrand oligopoly, while homogeneous product Cournot oligopoly has significant empirical relevance. In our model firms invest in product differentiation if differentiation investments are sufficiently effective (i.e. if differentiation is not too costly). The threshold level of differentiation effectiveness needed to induce such investments is an order of magnitude less for Bertrand firms than for Cournot firms. Thus there is a wide range over which Bertrand firms differentiate their products but Cournot firms do not. If Cournot firms do choose to differentiate their products, corresponding Bertrand firms always differentiate more. We also establish the important insight that if product differentiation is endogenous Bertrand firms may charge higher prices and earn higher profits than corresponding Cournot firms, in contrast to the general presumption that Bertrand behavior is more competitive than Cournot behavior. Interestingly, consumer surplus increases with differentiation in the Cournot model but, due to sharply increasing prices, decreases with differentiation in the Bertrand model.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Network externalities and process R&D: A Cournot–Bertrand comparison

Intra-industry trade with Bertrand and Cournot oligopoly: The role of endogenous horizontal product differentiation

PurposeThe purpose of this paper is to investigate different effects of three network externality factors, i.e. local network size, network strength, and total network size, on online messenger, online community, chat room and e‐mail services.Design/methodology/approachIn the paper hypotheses are tested with a regression model using a survey data collected from 107 MBA students at a business school in South Korea.FindingsThe paper finds that the three network externality factors have different effects on the users' future usage intention for the four Internet services. Local network size is significant for online messenger services, local network size and network strength are significant for online community services, and total network size is significant for chat room services. For email services, none of the network externality factors are significant.Research limitations/implicationsThe paper shows that a total network size is an important network externality factor affecting the success of a network. However, users' satisfaction with network services and two additional network externality factors, local network size and network strength, are also important determinants. To generalize the finding, investigations into other network services in other environments and into some offline networks are necessary.Originality/valueThe paper shows that depending on types of networks, managers can focus on different important network externality factors in managing their networks.

A two-stage duopoly game model is proposed in markets with network externalities where firms compete in product innovation first and then quantity. The product innovation is aimed at increasing product differentiation. First we investigate private optimum and analyze how network externality and compatibility affecting firms' incentives to invest. Then we study social optimum investment and compare the social and private incentives to product innovation for differentiation. The main results are as follows: (i) the firm with low marginal cost investing more than the one with high marginal cost may happen only when the market exists network externality and products have some compatibility between firms at the same time; (ii) when firms' marginal costs are equal, the private optimal R&D efforts increase with network strength and compatibility; But when firms' marginal costs are different, the optimal R&D effort of the firm with low marginal cost may decrease with network strength; (iii) the private incentive to provide product differentiation is lower than the social incentive.

In recent years, more and more wealth management platforms have adopted Internet wealth management (IWM) services to attract users. Due to the intensive competition and low switching costs, it is essential for platforms to enhance users’ willingness to continue using IWM services. Comprehensively considering the role of network externalities and herding, this study identified the factors affecting users’ continuous intention of IWM service. The research model was tested using survey data collected from 637 respondents concerning their perceptions of IWM services. The results indicate that network externalities (network size, perceived complementarity, network strength) have significant impact on herding and perceived value, thus affecting continuance intention. Furthermore, herding and perceived value have a greater impact on continuance intention of users with low financial literacy than that of users with high financial literacy. This study could benefit wealth management platforms and researchers seeking to improve the retention rates of IWM users.

Product differentiation, process R&D, and the nature of market competition

ABSTRACTGovernment regulations are believed to confine targeted firms' economic power, leading to a decline (rise) in producer (consumer) surplus. This paper explores the implications of location regulation in a spatially discriminatory pricing model with homogeneous products and linear transportation costs. Contrary to conventional wisdom, location regulation benefits (harms) producers but harms (benefits) consumers when firms engage in quantity (price) competition. Next, under location regulation, Bertrand firms are less (more) dispersed than Cournot firms if the transport rate is high (low). I also extend the analysis by comparing location and price regulations, as well as considering product differentiation and quadratic transportation costs.

Early infancy is a crucial period for brain development, during which fundamental functional and structural frameworks are established. Understanding the maturation of large-scale brain networks during this stage is essential for characterizing normative neurodevelopment and identifying potential deviations linked to neurodevelopmental disorders. In this study, we investigated developmental changes in the spatial organization of functional brain networks in infants using a longitudinal resting-state fMRI dataset comprising 137 scans from 74 low-likelihood developing infants aged 0-6 months. We applied independent component analysis to extract large-scale brain networks and utilized advanced spatial metrics, including network-averaged spatial similarity (NASS) to assess alignment with group-level patterns, network strength to quantify neural engagement based on voxel intensities, and network size to examine spatial distribution. Our findings reveal significant age-related increases in NASS across multiple networks, indicating greater consistency in functional organization over time. Additionally, most networks demonstrated increased network strength, reflecting heightened neural involvement, while network size exhibited distinct developmental trajectories, with some networks expanding and others remaining stable. These results highlight the dynamic evolution of functional brain architecture during early infancy, providing critical insights into neurodevelopmental processes.Clinical Relevance- This study provides critical insights into early brain network development, which is essential for identifying biomarkers of neurodevelopmental disorders such as autism and schizophrenia. By mapping typical maturation patterns using advanced spatial metrics, our findings offer a foundation for early detection of atypical development. Deviations in network organization and strength could serve as early indicators, supporting neuroimaging-based screening and intervention strategies to optimize neurodevelopmental outcomes.

The current study provides a comprehensive analysis and integration of the literature on the social network correlates of individual innovation. Reviewing the extant literature, we cluster existing network measures into five general properties—size, strength, brokerage, closure, and diversity. Using meta-analysis, we estimate the population effect sizes between these network properties and innovation. Results showed that brokerage had the strongest positive relation to innovation, followed by size, diversity, and strength. Closure, by contrast, had a weak, negative association with innovation. In addition, we offer a path-analytic integration of the literature proposing and testing the direct and indirect effects of the five properties on innovation. We suggest that network size and strength impact innovation through a web of relations with the more proximal features of brokerage, closure, and diversity. Our path-analytic integration considers the two dominant perspectives on the effects of social networks—brokerage versus closure—simultaneously allowing us to establish their relative efficacy in predicting innovation. In addition, our model highlights that network strength can have both negative and positive effects (via different direct and indirect pathways) and thus inherently involves a tradeoff. We discuss the implications of these results for future research and practice.

We present a new urban transit investment model, integrating transport economic theory regarding optimal investment with transport modeling, planning, and network design. The model expands on the theory of optimal transit network planning and investment, accounting for the effects of the investment on accessibility, level of service, and speed. The model seeks long-term optimal transit investment and optimal road pricing simultaneously in an integrated, unified model. To illustrate the advantages of our approach, we applied our empirical model to two case studies, Tel Aviv and Toronto, integrating our theoretical contribution into practice. Our results demonstrate the model’s ability to indicate the optimal transit mode and investment on a corridor level and the total investment required for the city transit network. The model results were compared to the actual and planned transit networks of Tel Aviv and Toronto and showed the model’s capability to produce a good balance of strategic design and network details. The research concludes that applying the right toll with the applicable transit investment is crucial for obtaining an efficient network and performance. This research can direct planners and policymakers in planning urban transport and provide a comprehensive set of guidelines for optimizing the simultaneous investment in mass transit and the congestion toll toward more sustainable cities and transportation systems.

Network compatibility, intensity of competition and process R&D: A generalization

What determines optimal R&D investment in a market with indirect network effects? We analyze this question in a hardware-software framework, where software firms strategically invest in quality upgrades. We find that a firm's optimal investment depends predominantly on (1) its quality level relative to its competitors on the same hardware and on (2) the quality level of software firms on the same hardware relative to other hardware platforms. Using a dynamic model, we examine the effect of initial quality differences within and across platforms on firms' investment behavior. We show that small quality differences across platforms stimulate investment across firms on the same platform, regardless of their current quality level. However, large quality differences across platforms affect competition within platforms such that a firm's quality level relative to competitors on the same platform may increase or reduce its incentives to invest. In this case, responses to own and cross quality upgrades are determined by the overall market structure. The two different responses - increased or reduced investment, give rise to a taxonomy of optimal investment strategies. Since responses depend on market structure, we can then map a firm's position within the market into its optimal investment strategy.

In network industry under Cournot and Bertrand competition, we examine a model when owners of firms hire biased managers who have incorrect market demand. Contrast to previous studies, we show that (i) regardless of the strength of network externalities when consumers form the responsive and passive expectations, owners realize strategic advantage by hiring biased managers to be more aggressive under Cournot and Bertrand competition, (ii) firms prefer facing passive expectations for the weak network externalities and vice versa for the strong network exteranlities under Bertrand and Cournot competition, (iii) if the network size is sufficiently large, then the prisoner's dilemma that firms hire aggressive managers no longer exists under both competition modes. As with no delegation case, we obtain the different rankings of firms' profit depending on both network externalities and forming of expectations under Cournot and Bertrand competition.