Network Effects and Product Differentiation
摘要
Many new products developed in recent industries such as computers, mobile phones, or hi-fi systems are characterized by certain properties that do not exist in the case of more traditional products, such as tomatoes, salt, or chairs. Among these properties, it should be noted first of all that some of these products must often be used in a complementary way with other goods or services, otherwise they will be completely useless. For computers, hardware is of no interest without software. Similarly, a CD player is useless without the CDs themselves. Second, these goods are often subject to strong consumption externalities because the utility of their consumption depends crucially on the consumption of the same goods by other agents. For example, the effectiveness of email or cell phones as a means of communication is strongly conditioned by the number of people who are themselves connected to the network: what is the point of a mobile phone subscription if no other customers subscribe to it? Finally, the use of these goods often requires learning that leads their users to be inexorably linked to the model they initially chose, which makes it difficult, if not impossible, to use an alternative model without incurring a very high training cost.