Quantifying and interpreting network effects: ‘Own-network’ is not the same as ‘firm-level’

Leo Van Hove

Information Economics and Policy, 2018, vol. 45, issue C, 47-51

Abstract: This note revisits existing research on network effects in the mobile telephony industry. It highlights that – defined correctly – own-network and firm-level network externalities are two different concepts, and that mixing them up leads to inaccurate interpretations. In particular, I demonstrate that the ratio of cross- to own-network effects is an imprecise measure of compatibility because it does not accurately isolate network effects that convey market power from effects that do not. As an alternative, I propose the ratio of industry- to firm-level network effects.

Keywords: Network effects; Own-network; Cross-network; Firm-level; Industry-level; Mobile telephony (search for similar items in EconPapers)
JEL-codes: D12 D62 L14 L96 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:45:y:2018:i:c:p:47-51

DOI: 10.1016/j.infoecopol.2018.08.002

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