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information technology that still dominates due to network effects. 6.2 Where’s All That Value Come From?
L E A RN I N G OBJ E C T I V E S
1. I dentify the three primary sources of value for network effects.
2. Recogniz e factors that contribute to the staying power and complementary benefits of a
product or service subject to network effects.
3. Understand how firms like Microsoft and Apple each benefit from strong network effects. The value derived f ro m netwo rk ef f ects co mes f ro m three so urces: exchange, staying po wer, and
co mplementary benef its. Exchange
Facebo o k f o r o ne perso n isn’t much f un, and the f irst guy in the wo rld with a f ax machine didn’t
have much mo re than a paperweight. But as each new Facebo o k f riend o r f ax user co mes o nline, a
netwo rk beco mes mo re valuable because its users can po tentially co mmunicate with mo re peo ple.
These examples sho w the impo rtance o f exchange in creating value. Every pro duct o r service
subject to netwo rk ef f ects f o sters so me kind o f exchange...
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This document was uploaded on 01/31/2014.
- Winter '14