ECON 1 Lecture Notes - Lecture 19: Switching Barriers, Polyphase System, Network Effect
Document Summary
Positive feedback: makes the strong grow stronger and the weak grow weaker. There are two types of networks: real network and virtual network: real networks: the linkages between the nodes are physical connections, for instance railroads, virtual networks: the linkages between the nodes are invisible, for instance nintendo 64 users. Both networks have a fundamental economic characteristic: the value of connecting to a network depends on the number of other people already connected to it. (also referred as network externalities, network effects or demand-side economies of scale) It is always better to be connected to a bigger network than a smaller one. There are two types of feedback: positive and negative feedback: positive feedback: makes the strong grow stronger and the weak grow weaker, negative feedback: the strong get weaker and the weaker get stronger. Positive feedback cannot be compared with growth; positive feedback translates into rapid growth: succeed feeds on itself (virtuous cycle).
