03

Question 1

Term

Answer 1

Definition

Question 2

Network Effect

Answer 2

Network Effect: The effect that one user of a good or service has on the value of that product to other people. More users increase its value.

Question 3

Network Economics

Answer 3

Network Economics: Business economics that benefit from network effects, where the value of a product or service increases with the number of users.

Question 4

Metcalfe’s Law

Answer 4

Metcalfe’s Law: The value of a telecommunications network is proportional to the square of the number of connected users.

Question 5

Diminishing Returns

Answer 5

Diminishing Returns: As more participants join a network, at some point, additional users start reducing the value for existing ones.

Question 6

Increasing Returns

Answer 6

Increasing Returns: More users lead to higher value creation, often driving a monopoly with value-based pricing and fat profits.

Question 7

Tipping Point

Answer 7

Tipping Point: When the perceived value of adoption exceeds the cost of adoption, triggering rapid growth.

Question 8

Lock-in

Answer 8

Lock-in: A situation where switching costs prevent users from adopting alternative technologies. An example is the QWERTY keyboard.

Question 9

Positive Network Effect

Answer 9

Positive Network Effect: Every new user adds value to existing users.

Question 10

Negative Network Effect

Answer 10

Negative Network Effect: Removal of a user can increase the value for the remaining users, or excessive use of the service leads to congestion.

Question 11

Supply-Side Economies of Scale

Answer 11

Supply-Side Economies of Scale: Cost advantages gained by increasing production.

Question 12

Demand-Side Economies of Scale

Answer 12

Demand-Side Economies of Scale: Also known as network effects, where more users increase the value for other users.

Question 13

Platform Company

Answer 13

Platform Company: A company that facilitates exchanges between user groups in multi-sided markets, enabling value creation.

Question 14

Two-Sided Market

Answer 14

Two-Sided Market: A platform facilitating interactions between two interdependent groups, where more users from one group increase the value for the other.

Question 15

Peer-to-Peer Model

Answer 15

Peer-to-Peer Model: A business model that connects individuals from a homogenous group to trade services or goods. Example: Airbnb.

Question 16

API

Answer 16

API (Application Programming Interface): A tool for building software applications, allowing platforms to interact and integrate efficiently.

Question 17

Data Network Effects

Answer 17

Data Network Effects: More data collected by a platform leads to better service improvements, which attract more users, generating even more data.