Business, 07.06.2020 03:57, meghan0123

Suppose that there are 100 people in a market for some good. Their reservation price, v, is uniformly distributed between $1 and $50. Suppose also that the good exhibits network externalities. For example, let us suppose that the value of the good to person v is v·n where n is the number of people who are also consuming the good. Imagine the good can be supplied through a constant returns to scale technology so the supply curve is a flat line at the price level that equals average cost. Assume this average cost is $937.5.What is the largest possible size of the network in equilibrium?

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Suppose that there are 100 people in a market for some good. Their reservation price, v, is uniforml...