1. Technology Adoption with Network Externalities: -good/technology that is more valuable to a user the more other users adopt the same good/techno or a compatible one -direct effect (telephone) -indirect effect (Ford service stations) Demand: -consumers must anticipate which good/technology will be used by others -want to coordinate

2. Problems: -excess inertia (wait to adopt) -excess momentum (to quick to adopt) Supply: -how is a technology chosen? -standards set by government or industry committees -left to marketplace (penetration pricing)

3. Vertical Relations Manufacturing firms sell to Retailers and these firms sell to final consumers -Retailer is last link in a vertical chain of transactions Possible arrangements: -Vertical Integration: Manufacturer absorbs retailer -Vertical Restraints: Contractual arrangements between Manufacturer and Retailer to ensure certain services are provided

4. Without arrangement: Problem -chain of monopolies--double price distortion Possible Solutions: Two-part Tariff/Franchise Fee Price Ceiling Quota Increased competition

5. Problems with Retailer competition -Underprovision of services (ex. Consumer education, advertising) because of incentive to free-ride on competitor Solutions: -Exclusive territory contracts -Limit number of distributors -Price floor (Resale Price Maintenance)

6. Manufacturer Competition -Retailers have some market power of Manufacturer—Slotting allowances -Free-riding problem Solutions -Exclusive Dealing Contracts