 Direct network effects, small-world networks, and industry formationJeffrey L. Funk Telecommunications Policy, vol. 33, issue 5-6, 241-252 Abstract: This paper addresses the formation of industries that involve direct network effects. Using two concepts from the literature on network effects (critical mass and inverse demand curves) and descriptive data from the formation of five telecommunication-related industries, this paper argues that a critical mass of users was created multiple times in these industries where multiple critical masses of users can be represented as local maximums in an inverse demand curve. The existence of these multiple local maximums reflects the existence of different sub-populations of users within a total population of potential users where these populations of users can be considered small-world networks. Initially the different sub-populations represent fragmented networks of users that are served by fragmented networks of firms. Over time connected networks of both firms and users emerge. Keywords: Network; effects; Critical; mass; Inverse; demand; curve; Small-world; networks; Telephone; Facsimile; Wireless; Video; Internet; mail (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:telpol:v:33:y::i:5-6:p:241-252 Ordering information: This journal article can be ordered from Access Statistics for this article Telecommunications Policy is currently edited by Erik Bohlin More articles in Telecommunications Policy from Elsevier |
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