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MGCR 331 (36)
Chapter 6

notes Chapter 6- network effect.docx

2 Pages

Management Core
Course Code
MGCR 331
Emma Vaast

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Chapter 6 Understanding network effect Network effects Also known as Metcalfes Law or network externalities When the value of a product or service increases as its number of users expandsThe value derived from network effects comes from three sources exchange staying power and complementary benefitsExchange Every product or service subject to network effects fosters some kind of exchange Ex Facebook alone on facebook sucks good if there are a lot of people to exchange withStaying power The longterm viability of a product or serviceRelated to switching cost The most a user invests in learning buying and installing a product the less hed like to changeComplementary benefits Products or services that add additional value to the primary product or service that makes up a network It can be the howto books etcPlatforms Products and services that allow for the development and integration of software products and other complementary goods Windows the iPhone the Wii and the standards that allow users to create Facebook apps are all platformsOnesided or twosided markets In onesided markets users gain benefits from interacting with a s
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