Monopoly provision of a network Service An early model by rohlfs (1974)illustrates many of the issues that surround markets with network effects Imagine some service, say a cable network, where consumers hook up to the system but the cost of providing them service after that is effectively zero Provider is a monopolist charging a"hook up?"fee but no other payment The basic valuation of the product v, is uniformly distributed across consumers from 0 to $100. Consumer willingness to pay is fv, where f is the fraction of the consumer population that is served · TThe ith’ s consumer, s demand is 0 if fv, <p qi= 1if/v1≥P3 Monopoly Provision of a Network Service • An early model by Rohlfs (1974) illustrates many of the issues that surround markets with network effects – Imagine some service, say a cable network, where consumers “hook” up to the system but the cost of providing them service after that is effectively zero • Provider is a monopolist charging a “hook up” fee but no other payment • The basic valuation of the product vi is uniformly distributed across consumers from 0 to $100. Consumer willingness to pay is fvi where f is the fraction of the consumer population that is served • The ith’s consumer’s demand is: 0 if fvi < p 1 if fvi  p qi D =