Firm value in emerging network industries

Lorenz Schneider

Information Economics and Policy, 2014, vol. 26, issue C, 75-87

Abstract: This paper examines emerging industries that exhibit positive network effects. We put forward a dynamic model in which two technologies compete to be the standard. The model provides a quantitative method for the valuation of firms. We use the model to examine the relationship between network effects, consumer heterogeneity, and prices. We show that the firm value depends strongly on the particular choice of the network strength function. We compare three types of such functions, identify shortcomings of traditionally used ones, and propose a more realistic one.

Keywords: Network industries; Network effects; Market expectations; Firm valuation; Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: L15 O33 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:26:y:2014:i:c:p:75-87

DOI: 10.1016/j.infoecopol.2014.01.001

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