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Targeting Teaching Network Externalities and Standardization: A Classroom Demonstration

Christopher Ruebeck, Sarah Stafford (), Nicola Tynan (), William Alpert (), Gwendolyn Ball () and Bridget Butkevich ()
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Sarah Stafford: Department of Economics, College of William and Mary
Nicola Tynan: Department of Economics, Dickinson College
Gwendolyn Ball: Department of Economics, University of Illinois at Urbana-Champaign
Bridget Butkevich: Department of Economics, George Mason University

Southern Economic Journal, 2003, vol. 69, issue 4, 1000-1008

Abstract: This paper presents a classroom game that can be used to demonstrate network externalities, standardization, and switching costs. In the basic game, students independently choose a technology whose value depends on the total number of students choosing that technology. In the next round, sequential decision making is allowed that quickly leads to standardization. Introducing imperfect information and switching costs into subsequent rounds can lead to the real-world phenomenon of an inferior technology becoming the standard. This exercise can be used in principles of economics classes to teach these important concepts without requiring mathematical models. In more advanced classes, construction of the mathematical model behind the game may be assigned.

Date: 2003
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Handle: RePEc:sej:ancoec:v:69:4:y:2003:p:1000-1008