In an industry with network effects and differentiated products, it is possible for the industry to become an oligopoly if
A) they engage in a zero-sum game.
B) they use a price-leadership model.
C) they use a kinked demand curve model.
D) a few firms reap most of the sales gains resulting from positive market feedback.

Question

Quizplus · Accepted Answer

In an industry with network effects and differentiated products, positive market feedback can lead to a few firms reaping most of the sales gains, which can result in an oligopoly. The network effects can create barriers to entry for new firms, and the differentiated products can allow the firms to establish themselves as market leaders. Additionally, the positive feedback can lead to a concentration of market power among a few firms, which can further entrench their positions in the industry. Therefore, choice D is the correct answer.

In an Industry with Network Effects and Differentiated Products, It