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Essay / Research Paper Abstract
This 6 page paper looms at what is meant b the network effect, also known as network externalities and considers show and why similar standards may be adopted by industry and consumers along with the benefits this may bring. The bibliography cites 5 sources.
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6 pages (~225 words per page)
File: TS14_TEneteffect.rtf
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may add more value on their use than the isolated good or purchase and may even be nearly useless if they are not used with other compatible goods or services.
These types of markets constitute networks and illustrate the concept of the network effect (Katz and Shapiro, 1985). In a market such as this there are what are
generally terms as positive consumption externalities meaning that the purchase of one good will enable or enhance the use of another and as such the network effect is seen in
the way the goods form a network in their use (Katz and Shapiro, 1985). There are many examples of markets that operate in this way especially in areas related
to technology. One example is that of the facsimile machine these for a network as they have to work with the same system in order to be compatible with other
fax machines owned by other parties. If they were not compatible the message that was encoded and sent by one would not be able to be received at the other
end. An early paper in the subject looked at the telecommunications industry as an example of a network effect (Rohlfs, 1974). The
same arguments of compatibility and interaction can be seen today widely in the use of infomaion technology software and hardware (Brynjolfsson and Kemerer, 1996), another example of this is the
way in which DVD payers have been produced to a set industry standard (Dranove and Gandal, 2003). The concept of the network effect
is not limited to the high technology sectors of the market, there are also many other areas where there is compatibly, from the standardisation of plumbing equipment to the design
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