Exam 7: Understanding Network Effects: Strategies for Competing in a Platform-Centric, Winner-Take-All World

Worldwide auction leader eBay started operations in Japan just five months after Yahoo! launched its Japanese auction service. But eBay was never able to mount a credible threat and ended up pulling out of the market. This example shows that:

In a market influenced by network effects, the winning product or service is determined by its technical superiority.

The video game console market is a network market in which Sony's PlayStation 2 (PS2) dominated over Microsoft's Xbox offering. This has been possible due to:

A firm is said to have suffered from the _____ when it preannounces a forthcoming product or service, and experiences a sharp and detrimental drop in sales of current offerings as users wait for the new item.

Which of the following is an example of a measure taken by a firm to encourage the development of complementary goods?

Moving first plays a significant role in markets influenced by network effects.

Which of the following terms is used as an alternative to switching costs?

A firm can spend no money and time, yet expect to enhance its offerings, by:

Nokia is a cell phone brand that offers digital cameras as part of its cell phone products. It is now in direct competition with camera brands such as Canon and Sony, and has become the world's largest seller of cameras. This is an example of:

Startup firms that find new markets attractive but do not yet have products ready for delivery preannounce efforts causing potential adaptors to delay a purchasing decision until the new effort rolls out.

What are "network effects"? Briefly explain the relevance they hold in an economic context.

Alpha Systems, a market leader in high-end video games, has designed its products such that it is difficult for the consumers to migrate to a rival. Which of the following is true about this scenario?

The rise of social media has made _____ promotion a tool that many firms can exploit.