MB105 Lecture Notes - Lecture 4: Network Effect, Complementary Good, Switching Barriers

39 views2 pages

Document Summary

When network effect are present, the value of a product or service increases as the number of uses grows. More than one entity connecting together to get value ex. You need 2 phones to communicate, one alone won"t do anything. The more users/devices you add to these networks, the more value there is. The value derived from network effects comes from three sources: Staying power cost of switching also determines whether or not you stay within a network. Low= not expensive to switch/get out, high=expensive to switch/get out. Firms are very aggressive in the early stages of these industries: Battling a leader with network effects is tough. Expand by redefining the market to bring in new categories of users or through convergence ex. For incumbents, constantly innovate to create a moving target and block rival efforts to access your network. For large firms with well-known followers, make preannouncements, fud fear uncertainty doubt ex.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents