The majority of industrial organizations literature on network externalities looks at firm behavior under given market characteristics. The present paper instead asks the question whether the presence of network externalities can change market characteristics, specifically, whether an initially...

We develop a model of R&D competition between an incumbent and a potential entrant with network externalities and durable goods. We show that the threat of entry eliminates the commitment problem that an incumbent may face in its R&D decision due to the goods’ durability. Moreover, a potential...