In this paper, I study the competition of platforms which offer differentiated products à la Hotelling in the presence of network effects when the location choices are endogenous. Considering platform competition with both within- and cross-sided network effects, it can be proved that, in contrast to the principle of maximum differentiation in the standard Hotelling model, a tendency of agglomeration exists on at least one side, when the difference of cross-sided network effects is sufficiently high. This result stands firmly not only under mill pricing policy, but also under discriminatory delivered pricing.

  • Capacity Precommitment and Price Competition — the Case of Inelastic Demand

In this paper, I study a modification of the model in Kreps and Scheinkman (1983) with perfectly inelastic demand. I characterize the equilibrium with both constant and increasing marginal costs of capacity installation. The results show that monopoly outcome can always be sustained in equilibrium. With constant marginal cost of capacity installation, the market is always fully covered in equilibrium and the equilibria are equally efficient. When increasing marginal capacity installation cost is assumed and the cost is sufficiently high, there is a unique subgame-perfect Nash equilibrium in which firms choose a constant capacity and market may not be fully covered.

In credence goods markets, experts have better information about the appropriate quality of treatment than their customers. Experts may exploit their informational advantage by defrauding customers. Market institutions have been shown theoretically to be effective in mitigating fraudulent expert behavior. We analyze whether this positive result carries over to a situation in which experts are heterogeneous in their diagnostic abilities. We find that efficient market outcomes are always possible. However, inefficient equilibria can also exist. If experts provide diagnosis-independent treatments in equilibrium, an increase in experts’ ability or in the probability of high-ability experts might not improve relative market efficiency.


Work in Progress

  • Expert Heterogeneity in Credence Goods Markets (with Vasilisa Petrishcheva, Alexander Rasch, Marco A. Schwarz and Christian Waibel)

  • Entry in Markets with Network Effects (with Christian Wey and Mengxi Zhang)