Network_Effects - Principles for Evolving Markets Principle...

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Network Effects What is it? Types? Other Examples?
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Principles for Evolving Markets Principle 1: A monopoly in the bush is often worth more than an oligopoly in hand, that is, under certain conditions it will be worthwhile to compete “for the market,” rather than “compete within the market.” Principle 2: One-way compatibility between competing standards may backfire when both standards are still in their infancy and there is relatively little software available for either standard. The reason is that vendors of complementary products will likely choose to release their software in a form that is compatible with the technology that reaches BOTH audiences. Principle 3: Firms competing in markets with network effects must insure that their technology appeals to early adopters. Otherwise, a bandwagon of support can build an insurmountable lead for another technology.
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Unformatted text preview: Principles for Evolving Markets Principle 4: Firms should insure that they have a formidable value net, which consists of suppliers, competitors, and producers of complementary products and services. This is especially important in industries with network effects. Principle 5: Make sure at least one format survives. If complementary product providers support different incompatible standards, demand may be very low for each of the incompatible standards and both might fail. Principle 6: Communications among consumers via the Internet will likely play a big role in future standards battles. While the DVD vs. DIVX battle was likely the first key standards war where coordination among consumers via the Internet had a major impact, the Internet will surely play a key role in future standards competition....
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This note was uploaded on 04/04/2012 for the course MGMT 382 taught by Professor Roymdejoiejr during the Fall '08 term at Purdue University-West Lafayette.

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Network_Effects - Principles for Evolving Markets Principle...

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