Abstract
Network industries are common: telephone, Automatic Teller Machines (ATMs), railroads, roads, and electricity are just a few examples. An examination of some important public policy aspects of network industries requires a deeper understanding of the concepts of “compatibility” and “network externalities” and especially the role they play in determining market conduct and structure.1 This analysis leads us to conclude that compatibility and a form of network externalities play a similar role in non-network industries as long as there are significant complementarities between types of goods. This similarity allows us to utilize the significant volume of economic and legal thought on vertical relations to analyze antitrust and related regulatory problems for network industries.
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