  We discuss price competition when positive network effects are the only other
factor in consumption choices. We show that partitioning consumers into two
groups creates a rich enough interaction structure to induce negative marginal
demand and produce pure price equilibria where both firms profit. The crucial
condition is one group has centripetal influence while the other has
centrifugal influence. The result is contrary to when positive network effects
depend on a single aggregate variable and challenges the prevalent assumption
that demand must be micro-founded on a distribution of consumer characteristics
with specific properties, highlighting the importance of interaction structures
in shaping market outcomes.
