Network Externalities
Result in the Emergence of a Dominant Design.
Value of Product = +f{Installed Base [network] of compatible products}.
- Phone: a positive function
- Of the size of the (compatible) network it is connected to.
- Value of a PC a positive function of
- Installed Base of Compatible Products with Which Files can be Exchanged (Printers, Other PCs,).
- Availability of Compatible Applications Software
Metcalf’s Law:
- The "value" or "power" of a network increases in proportion to the square of the number of nodes on the network