chapter  3
18 Pages

Critical Mass and Network Evolution in Telecommunications

ByNicholas Economides, Charles Himmelberg

Many goods, most notably in the telecommunications industry, exhibit network externalities. That is, the value of the good to the consumer depends on the number of consumers purchasing the same (or a similar) good. Many other consumption goods, such as computer software, display network externalities, although usually in 1ess obvious ways. All such goods have in common the feature that an increase in expected sales of netwark services creates positive expected benefits far every consumer of the good.