Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors' own opinions and do not necessarily reflect those of the editor. Terms of use: Documents in AbstractWe analyze the role of consumer expectations in a Hotelling model of price competition when products exhibit network e¤ects. Expectations can be strong (stubborn), weak (pricesensitive) or partially stubborn (a mix of weak and strong). As a rule, the price-sensitivity of demand declines when expectations are more stubborn. An increase of stubbornness i) reduces competition, ii) increases (decreases) the parameter region with a unique duopoly equilibrium (multiple equilibria), iii) reduces the con ‡ict between consumer and social preferences for de facto standardization, and iv) reduces the misalignment between consumer and social preferences for compatibility. JEL-Classi…cation: D43, D84, L13Keywords: Network E¤ects, Expectations, Duopoly, Compatibility, WelfareWe thank Pio Baake and Vanessa von Schlippenbach for helpful comments. We are also grateful for valuable comments made by the referees. We gratefully acknowledge …nancial support by the Volkswagen Foundation for the research project "Innovation and Coordination." This paper is a substantially revised and re-titled revision of our paper "On the (Mis-) Alignment of Consumer and Social Welfare in Markets With Network E¤ects"(DIW DP No. 794).

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors' own opinions and do not necessarily reflect those of the editor. Terms of use: Documents in

We develop a dynamic model of strategic investment in a transnational pipeline system. In the absence of international contract enforcement, countries may distort investment in order to increase their bargaining power, resulting in overinvestment in expensive and underinvestment in cheap pipelines. With repeated interaction, however, there is a potential to increase efficiency through dynamic collusion. In the theoretical part we establish a fundamental asymmetry: it is easier to avoid overinvestment than underinvestment. Calibrating the model to fit the Eurasian pipeline system for natural gas, we find that the potential to improve efficiency through dynamic cooperation is large. In reality, however, only modest improvements over the non-cooperative solution have been achieved.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors' own opinions and do not necessarily reflect those of the editor. Terms of use: Documents in Technology Adoption in Markets withNetwork E¤ects: Theory and Experimental Evidence Claudia Keser y Irina Suleymanova z Christian Wey x October 2011 AbstractWe examine a technology adoption game with network e¤ects in which coordination on technology A and technology B constitute a Nash equilibrium. Coordination on technology B is assumed to be payo¤-dominant. We de…ne a technology's critical mass as the minimum share of users necessary to make the choice of this technology a best response for any remaining user. We show that the technology with a lower critical mass is risk-dominant and is chosen by the maximin criterion. We present experimental evidence that both payo¤ dominance and risk dominance explain participants'choices. The relative riskiness of a technology can be proxied using technologies'critical masses or stand-alone values.JEL-Classi…cation: C72, C91, D81

We analyze Bertrand duopoly competition in markets with network e¤ects and consumer switching costs. Depending on the ratio of switching costs to network e¤ects, our model generates four di¤erent market patterns: monopolization and market sharing which can be either monotone or alternating. A critical mass e¤ect, where one …rm becomes the monopolist for sure only occurs for intermediate values of the ratio, whereas for large switching costs market sharing is the unique equilibrium. For large network e¤ects both monopoly and market sharing equilibria exist. Our welfare analysis reveals a fundamental con ‡ict between maximization of consumer surplus and social welfare when network e¤ects are large. We also analyze …rms' incentives for compatibility and we examine how market outcomes are a¤ected by the switching costs, market expansion, and cost asymmetries. Finally, in a dynamic extension of our model, we show how competition depends on agents' discount factors.