Screening contracts in the presence of positive network effects

Based on the critical assumption of complementarity, this paper builds a general model to describe and solve the screening problem faced by a monopolist seller of a network good. By applying strict monotone comparative statics, we demonstrate that the joint presence of asymmetric information and positive network effects leads to a strict downward distortion from the welfare-maximizing allocation for all consumers. We also show that the equilibrium allocation is an increasing function of network effect intensity.