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Lock-ins in Network Effect Markets – Results of a Simulation Study

Draisbach, Tobias ; Widjaja, Thomas ; Buxmann, Peter (2013)
Lock-ins in Network Effect Markets – Results of a Simulation Study.
Hawaii International Conference on System Sciences. Wailea, HI, USA (07.-10.01.2013)
Conference or Workshop Item, Bibliographie

Abstract

Adoption processes in network effect markets – like the ICT industry – often lead to so-called “lock-ins” which means that one single standard or technology gets adopted by almost all market participants. Based on the work of Arthur [1] we present a simulation based model explaining a market’s tendency to lock-in by means of two factors: the strength of network effects and the network topology of potential adopters. In order to obtain a better understanding of the interconnection of the actors’ decisions we developed an approach to compare markets that show the same network effect strength but face different actor network topologies. We found that the predisposition of a market to show a lock-in induced by network effects generally increases with growing network effect strength and network density. However, our analysis shows that the way these two factors affect a market’s tendency to lock-in varies between random topologies and real life social topologies.

Item Type: Conference or Workshop Item
Erschienen: 2013
Creators: Draisbach, Tobias ; Widjaja, Thomas ; Buxmann, Peter
Type of entry: Bibliographie
Title: Lock-ins in Network Effect Markets – Results of a Simulation Study
Language: English
Date: January 2013
Event Title: Hawaii International Conference on System Sciences
Event Location: Wailea, HI, USA
Event Dates: 07.-10.01.2013
Abstract:

Adoption processes in network effect markets – like the ICT industry – often lead to so-called “lock-ins” which means that one single standard or technology gets adopted by almost all market participants. Based on the work of Arthur [1] we present a simulation based model explaining a market’s tendency to lock-in by means of two factors: the strength of network effects and the network topology of potential adopters. In order to obtain a better understanding of the interconnection of the actors’ decisions we developed an approach to compare markets that show the same network effect strength but face different actor network topologies. We found that the predisposition of a market to show a lock-in induced by network effects generally increases with growing network effect strength and network density. However, our analysis shows that the way these two factors affect a market’s tendency to lock-in varies between random topologies and real life social topologies.

Divisions: 01 Department of Law and Economics > Betriebswirtschaftliche Fachgebiete > Information Systems
01 Department of Law and Economics > Betriebswirtschaftliche Fachgebiete
01 Department of Law and Economics
Date Deposited: 24 Sep 2012 14:28
Last Modified: 05 Mar 2013 10:03
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