AEM 322 - Assignment 3 - Network Externalities

AEM 322 - Assignment 3 - Network Externalities - Simon Wong...

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Simon Wong 3/21/08 Assignment 3 – Network Externalities Prof. Aija Leiponen 1.) GMBuyPower: GMBuyPower.com is an online auto-sales website. Consumers can look for and purchase GM related automobiles online without the hassle of dealing with car salesman. However, this website has little to do with network externalities. The only part where I see network externalities is if this website were used as a consumer review website where previous buyers left comments on how each car performed or if they are satisfied. This information is valuable both to the consumer and to the supplier as well as it affects the demand for GM products. Therefore, the more users that use this website and leave their opinions on the cars they have purchased the more useful the website becomes. However, this can also serve to hurt the site as reviews can go either way. EBay: EBay.com is an online auction service. Generally, anyone can be a “seller” and sell whatever they wish (within reason) and any person can purchase such items through the auction set up through eBay. EBay definitely benefits from network externalities. In order to make such a service valuable, many different items must be available to purchase grab the interest of the plethora of customers for this business. Therefore, eBay relies a lot on its user base for both sellers and buyers. The more users eBay has, the more potential demand of its customer base can be met. Hi-Definition TV: Hi-Def TV is a new technology that allows for a clearer and crispy TV image to be portrayed at a higher resolution than a normal TV. The problem arises in that Hi-Def TV requires different equipment than normal TVs such as cables, receivers, and the TVs themselves. Therefore there is an issue of format switching which means you have to weigh the costs of
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This note was uploaded on 10/23/2008 for the course AEM 3220 taught by Professor Leiponen,a. during the Spring '07 term at Cornell University (Engineering School).

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AEM 322 - Assignment 3 - Network Externalities - Simon Wong...

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