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1. Definition 2. Background 3. Detailed Explanations 4. Real Application in the Market 1.Positive Feedback 2.Negative Point 5. Future Expansion 6. Reference.

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Presentation on theme: "1. Definition 2. Background 3. Detailed Explanations 4. Real Application in the Market 1.Positive Feedback 2.Negative Point 5. Future Expansion 6. Reference."— Presentation transcript:

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2 1. Definition 2. Background 3. Detailed Explanations 4. Real Application in the Market 1.Positive Feedback 2.Negative Point 5. Future Expansion 6. Reference

3 Network Externality The benefit from using a good increases with the number of other users of the same good The value created by the size of its installed base and the availability of complementary goods Installed base The number of users of a particular good Complementary goods Additional goods and services that enable or enhance the value of another good

4 The concept of Network Externality was initially introduced to just explain the growth of electronic space. But, as electronic space becomes one of the space of economic activity, network externality is most important theory of new coming economic phenomenon. The concept of network externality, which is introduced to understand Informationization by network revolution, was understood as the most important concept explains new coming network economy.

5 1. Definition 2. Background 3. Detailed Explanations 4. Real Application in the Market 1.Positive Feedback 2.Negative Point 5. Future Expansion 6. Reference

6 Detailed Explanation Little ValueSome ValueHuge Value Classic Example: Telephone Positive Effect For product or service: more users, more value Telephone, etc Negative Effect For product or service: more users, less value = Congestion Traffic, etc

7 Detailed Explanation Network Effect gives two type of advantages…. Direct Indirect Immediate Result of other users adopting the same system Examples: Fax, ,… Secondary result of many people using same system Examples: Cheaper toners, OS system competition… Key point is how to attract customers Critical Mass plays pivotal role for establish early success However, saturation occurs sooner later P2P Occurs.

8 Detailed Explanation Network Externality can result in lock-in effect Makes a customer dependent on a vendor for products and services Unable to use another vendor without substantial switching costs Lock in Effect After Saturation, n+1 person start to decrease the network value Exclusion value exists for some networks.. Resource Limit can occur No viable competitor exists for certain network providers.. Restrict resource, fee increase… Provider Complacency Negative Effect of Network Externality

9 1. Definition 2. Background 3. Detailed Explanations 4. Real Application in the Market 1.Positive Feedback 2.Negative Point 5. Future Expansion 6. Reference

10 Language (that is, English) Eple تفاحة ЯблокоJabłko Apple

11 Compatibility Windows(OS) and other applications competition between Beta and VHS Credit card Online service (Internet auction) Fax machine (fac-simile) Telephone network Railroad

12 Product and its complement Camera and its lenz Software and hardware

13 Example in Naver exclusive in internet portal market

14 1. Definition 2. Background 3. Detailed Explanations 4. Real Application in the Market 1.Positive Feedback 2.Negative Point 5. Future Expansion 6. Reference

15 alities.html alities.html /besen.htm /besen.htm display.asp?idx=449&g=1 display.asp?idx=449&g=1


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