MSCI 2130 Chapter Notes - Chapter 8: Network Effect, Complementary Good, Nyce
29 Jan 2017
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Document Summary
The value of a product/service increases as its number of users expands. Also referred to as network externalities or metcalfe"s law. Most products are not subject to network effects. Presence of network effects influences the choice of one product/service over another. Network effects are among the most powerful strategic resources that can be created by technology-based innovation. Products/services subject to network effects foster exchange, which creates value. Staying power the long term viability of a product/service. Total cost of ownership (tco) an economic measure of the full cost of owning a product: includes direct and indirect costs. Complementary benefits products/services that add additional value to the primary product/service that makes up a network. Platforms products/services that allow for the development and integration of software products and other complementary goods. Value-adding sources work together to reinforce one another to make the network effect even stronger: each add-on of an ios product enhances the value of choosing it over a rival.
