Exam 14: Network Goods

(Figure: Goods with Fixed Capacities) Based on the graph, we see that an increase in supply leads to a(n) _____ in price for a small network with fixed capacity and a(n) _____ in price for a non-network good.

In which situation would regulation be MOST likely to be effective?

Which statement is TRUE about regulation to promote competition in network markets?

Interconnection

Huang is a core user and Jun is a casual user of the video game series Liz Lizardwoman. A new game is being issued in the series and will sell for $40 the first day it is available. Which statement would be consistent with Huang and Jun's user classifications?

(Figure: Network Goods and Fixed Capacities) The graph represents a small network with a fixed capacity. If capacity increases from S₀ to S₁, D shifts parallel and to the right, and price increases.

Which of these is a goal of the government when regulating network goods?

A network externality is an external cost or benefit generated from the

Which of these is an example of a lock-in strategy?

Explain what a vicious cycle is and when it will occur.

Network goods have very large economies of scale. This means that the fixed cost of a network good is ____ and the marginal cost is _____.

Bundling is a strategy of differentiating a good by packaging it into multiple products for people with different demands.

For every mile flown with them, Getcha-There-In-One-Piece Airline awards its loyalty-program customers with points that can be used to earn future free flights. This is an example of versioning.

Where would the range where the network effect dominates the price effect be?

When the tipping point is reached for an expanding network good, this has the effect of creating a(n)

Any regulatory policy should be evaluated based on the tradeoff between its benefits and costs.

Which example is NOT part of a physical network?

In the downward-sloping segment of a network demand curve, casual users join the network.

Firms use lock-in strategies to make it less attractive for its customers to leave the network.

There are two main types of cell phone networks (GSM and CDMA) used in the world. CDMA is used primarily by Verizon and Sprint in the United States. GSM is used by AT&T and T-Mobile in the United States, as well as most of the rest of the world. In the United States, customers of AT&T and T-Mobile can receive calls from and make calls to customers of Verizon and Sprint. This indicates that