Chapter 1: Network Effects

Question 1

What are three values from network effects?

Answer 1

1. Exchange
2. Staying in power
3. Complementary benefits

Question 2

What are one sided markets and same-side exchange benefits?

Answer 2

1. Most value from singe class of users

2. Benefits derived by interaction among members of a single class

Question 3

What are two-sided markets and cross-side exchange benefits?

Answer 3

1. Two distinct categories of participants, both of which are need to deliver value
2. When the rise of one user of the market causes rise in the second user

Question 4

Is network effects bad for innovation?

Answer 4

Can limit competition against dominant standard, but innovation within standard can blossom

Question 5

What is “seed the market” strategy?

Answer 5

In a two sided market, firms can change the ones who are willing to pay

Question 6

What is the “leverage backward compatibility” strategy?

Answer 6

Ability to take advantage of complimentary products develop for a prior generation of technology

Question 7

What is the “pre-announcement” strategy?

Answer 7

Announcing future product to delay purchasing decisions.

The Osborne Effect: A firm pre-announcing a product or service and experiencing a share drop in sales of current offerings as user wait