Networks

Many products have Debit use by therm HMS and …,.me Violently when by are used In combination with other products. Such
products are Complementary. Art important case Is a Luftwaffe, where different people are linked thereto cf\rough I particular medium. Types of networks include both sou defined by physiological. such IS telecommunication systems. electricity transmission newsworthy. computer clusters. pipelines. and roads. and tee indirect networks that occur when people use compatible system S (such IS Windows 98 ant VS v\incipience) or , speak em (such as Weight).

To understand em Gatun 01 networks. consider how far ,au could drlw ~r car without a network of PS Ronstadt or how valuable ,air homophone or e-mail would be If no one else had telephones or computers. Similarity. credit cards and ATM cards have value because by can be used In many Caution. Network markets special because consumers derive the equilibrium tends to gradate CO a single product which wills out OW II’ Its rivals. One of the best-known examples is computer operating system S.. where Microsoft Windows became the dominant system  In part because consume waned CO ~ sure that their computers could operate all the available software. (The Important antitrust case Ivoire,,&Microsoft Is discussed In Chaucer 17.) A second Interesting feature is thlt “history matten”b in network markets. A famous example Is the QWERTY by board used with your computer. You might wonder why this particular configuration of keys.  with Its awkward placement of the leers. became the standard. The design of the QWERTY keyboard In the nineteenth century was based on the concept of keep- ING eloquently used keys (like “e” and “0”) physically separated in order to prevent manual type Writers from jamming. 8y the time the technology for electronic typing evolved. tells of millions of ·people had already leaned to type on millions of typewriters. Replacing the QWERTY keyboard with l more efficient design would have been both expense and difficult to coordinate. Thus, the placement of the letters remains unchanged on todI(a keyboerd This example shows how III embedded net Work technoIo&Y can be extremely auntie.

It. similar example chat worries many environmental Is America’s “wasteful” automobile curlew,where die allCInl network of cars. roads, topsoil stations, and localization Wilbert difficult to division In favor of more enveloper. amenably friendly alternative, ~ Improved mass Shiite. Third. because newsworthy in com • compilation Inspiring  ~ economies of scale, expectation. dynamics. III lad to a Kannada array of business strait&health tip W nature cI networks mans that dM! cenci CO be “wln••e••-ab-aH” marba etch manse rivalry In the early and but a few competitiveness the wlnnln& ~ has Ernestine. In addition, nyetwork marba are aIten Inertial. so once a product has a substantial lad, It III be very difficult for other products to catch up. These charactertsd£s man that companies often wane to pc and widen an early Ibid on their riyals. Suppose ~ are ~ a network product. order to build on your early lead, you mi&ht persuade users that 10′.1 ••.• number one a.,. puffin&up your sales; .use “penttradon prIci”l” by offerl”l very low prices ,early adopters: bundle your product with lIIodler popular Propecia;or raise questions about your competitors’ quality or RI)’inI power. Above all, you would probably Invest …,.., Ii. Calvert”l .to shift out the demand curve for the product. If you are the fortunate winner, you will benefit from die economies cI scale in the network. lIE baete. IIICI enjoy your monopoly profits.

But don’t caIce Yaur dominant, Poseidon for ranted. Once your commandant& lead is questioned, the virtuous cycle of marbc dominance can easily cum into the vicious cycle of decline. Neuritics raise important Issues for public policy. Should government set standards to ensure competl-, doni Should memento caterwaul ~ Industries’ How should men antitrust policy treat monopolists like HIctosoft that have been the fortunate winners in die network race but use multicolored aesthetics Thea questions are on the minds of many public policymakers antisocial today.

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