Flashcards in Lecture 8 Deck (12):
What is a network effect?
Means that the value of a network increase as its number of users does. So each additional user in the network increases the value of the network for other users.
What is Matcalfe's law?
V = n sqaured
What is a congestion effect?
It is a negative network effect. Each addition to the network actually reduces the value of the network. eg. traffic jam or bandwith
Three value sources in a network?
1. Exchange: a larger number of users results in a greater reach for exchanging products and services
2. Staying Power: a larger number of users suggests a strong market position. Linked to switching costs.
3. Complementary benefit: Additional third party products that provide additional value to the network users
What is meant by platform ecosystem? and how does this create an exchange of value?
Platforms actively encourage third-party providers to integrate products and services (apps) with their software, creating ecosystems.
What is an application programming interface (API)?
makes it easy to fit a product to a platform software.
What is a one-sided market?
large share of value of derived from a single class of users
What is a two-sided market?
Value is derived from two categories of network users
Same side exchange benefit?
increasing value to a class of users resulting from an increase in the number of users of that class.
cross side exchange benefit?
increasing value to a class of users resulting from an increase in the number of users of another class.
Positive feedback loops
An increase in A leads to an increase in B which leads to an increase in A