Incumbency advantage and its value

Abstract

Markets with network effects are typically concentrated. The aim of this paper is to discuss some recent work on “incumbency advantage.” That is, the fact that firms already installed generate higher profits than entrants even if the latter offer identical or even better terms (in terms of price and quality) to consumers. In particular, we review recently known sources of the advantage and potential mitigating factors and point to a number of open issues.

Reference

Gary Biglaiser, Emilio Calvano, and Jacques Crémer, “Incumbency advantage and its value”, Journal of Economics and Management Strategy, vol. 28, n. 1, April 2019, pp. 41–48.