Market dynamics and indirect network effects in electric vehicle diffusion

The authors study the use of sales agents for network mobilization in a two-sided market platform that connects buyers and sellers, and they examine how the presence of direct and indirect network effects influences the design of the sales compensation plan. They employ a principal–agent model in which the firm tasks sales agents to mobilize the side of the platform that it monetizes (i.e., sellers). Specifically, the presence of network effects alters the agency relationship between the firm and the sales agent, requiring the platform firm to alter the compensation design, and the nature of the alteration depends on whether the network effects are direct or indirect and positive or negative. The authors first show how the agent’s compensation plan should account for different types of network effects. They then establish that when the platform firm compensates the agent solely on the basis of network mobilization on the side cultivated by the agent (sellers), as intuition would suggest, it will not fully capitalize on the advantage of positive network effects; that is, profit can be lower under stronger network effects. To overcome this limitation, the platform should link the agent’s pay to a second metric, specifically, network mobilization on the buyer side, even though the agent is not assigned to that side. This design induces a positive relation between the strength of network effects and profit. This research underlines the complexity and richness of network effects and provides managers with new insights regarding the design of sales agents’ compensation plans for platforms.

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Interoperability – Technical or economic challenge?

it - Information Technology ◽

10.1515/itit-2019-0027 ◽

2019 ◽

Vol 61 (5-6) ◽

pp. 243-252

Author(s):

Lars Stegemann ◽

Martin Gersch

Keyword(s):

Network Effects ◽

Cost Benefit ◽

Individual Case ◽

Economic Effects ◽

Path Dependencies ◽

Industry Standards ◽

Indirect Network Effects ◽

International Industry ◽

The Individual ◽

Lock In

Abstract Interoperability in healthcare is a long-standing and addressed phenomenon. In the literature, it is discussed as both the cause of an insufficiently perceived digitalization and in context with an inadequate IT-based integration in healthcare. In particular, technical and organizational aspects are highlighted from the perspective of the different involved actors to achieve sufficient interoperability. Depending on the individual case, various established international industry standards in healthcare (e. g. DICOM, HL7 or FHIR) promise simple adaptation and various application advantages. In addition to the technical view, this article assumes economic challenges as the main causes for the lack of interoperability not discussed in the forefront. The economic challenges were mentioned and sparingly discussed in few cases in the literature. This article aims to fill this gap by offering a first characterization of identified and discussed economic challenges in the literature with respect to the lack of interoperability in healthcare. Based on a systematic literature search, 14 of the original 330 articles can be identified as relevant, allowing a more economic perspective on interoperability. In this context, different economic effects will be described; this includes cost-benefit decisions by individual stakeholders under different kinds of uncertainty or balancing of known individual costs for interoperability against uncertain and skewed distributed benefits within an ecosystem. Furthermore, more sophisticated cost-benefit approaches regarding interoperability challenges can be identified, including cost-benefit ratios that shift over time, or lock-in effects resulting from CRM-motivated measures that turn (non)interoperability decisions into cost considerations for single actors. Also, self-reinforcing effects through path dependencies, including direct and indirect network effects, have an impact on single and linked interoperability decisions.

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Indirect Network Effects and Adoption Externalities

Review of Network Economics ◽

10.2202/1446-9022.1153 ◽

2008 ◽

Vol 7 (3) ◽

Cited By ~ 34

Author(s):

Jeffrey Church ◽

Neil Gandal ◽

David Krause

Keyword(s):

Network Effects ◽

Returns To Scale ◽

Social Benefit ◽

Software Systems ◽

Free Entry ◽

Private Benefit ◽

Increasing Returns To Scale ◽

Indirect Network Effects ◽

The Social ◽

Consumption Benefits

Can indirect network effects lead to adoption externalities? If so, when? We show that in markets where consumption benefits arise from hardware/software systems, adoption externalities will occur when there are (i) increasing returns to scale in the production of software, (ii) free entry in software, and (iii) consumers have a preference for software variety. The private benefit of the marginal hardware purchaser is less than the social benefit since the marginal hardware purchaser does not internalize the welfare improving response of the software industry, particularly the increase in software variety, on inframarginal purchasers when the market for hardware expands.

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INDIRECT NETWORK EFFECTS, NETWORK QUALITY AND THE SUCCESS OF A PLATFORM.

Academy of Management Proceedings ◽

10.5465/ambpp.2007.26523082 ◽

2007 ◽

Vol 2007 (1) ◽

pp. 1-7

Author(s):

Marco Iansiti

Keyword(s):

Network Effects ◽

Indirect Network Effects ◽

Network Quality

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