scholarly journals Coordination and Lock-In: Competition with Switching Costs and Network Effects

2006 ◽  
Author(s):  
Joseph Farrell ◽  
Paul Klemperer
Keyword(s):  
Network Effects ◽  
Switching Costs ◽  
Lock In

scholarly journals Tacit Collusion with Consumer Preference Costs

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Guillem Roig
Keyword(s):  
Switching Costs ◽  
Consumer Preference ◽  
Hand Preference ◽  
Dominant Strategy ◽  
The Other ◽  
Tacit Collusion ◽  
Other Hand ◽  
The One ◽  
Opposing Effects ◽  
Lock In

Abstract When consumers have preference costs, two opposing effects need to be assessed to analyse the incentives of firms to set collusive prices. On the one hand, preference costs make a deviation from collusion less attractive, as the deviating firm must offer a large enough discount to cover the preference costs. On the other hand, preference costs lock in consumers and make punishment from rivals less effective. When preference costs are low, the latter of the two effects dominates and collusion is more challenging to sustain than in a situation with no preference costs. With high enough preference costs, collusion is a (weakly) dominant strategy. These results do not eventuate in a model with switching costs.

Capturing Value in Platform Business Models That Rely on User-Generated Content

2021 ◽  
Author(s):  
Hemang Subramanian ◽  
Sabyasachi Mitra ◽  
Sam Ransbotham
Keyword(s):  
Network Effects ◽  
Business Models ◽  
Switching Costs ◽  
Service Level ◽  
User Generated Content ◽  
Organizational Boundaries ◽  
Considerable Uncertainty ◽  
Current Usage ◽  
Significant Interest ◽  
Using Data

Business models increasingly depend on inputs from outside traditional organizational boundaries. For example, platforms that generate revenue from advertising, subscription, or referral fees often rely on user-generated content (UGC). But there is considerable uncertainty on how UGC creates value—and who benefits from it—because voluntary user contributions cannot be mandated or contracted or its quality assured through service-level agreements. In fact, high valuations of these platform firms have generated significant interest, debate, and even euphoria among investors and entrepreneurs. Network effects underlie these high valuations; the value of participation for an individual user increases exponentially as more users actively participate. Thus, many platform strategies initially focus on generating usage with the expectation of profits later. This premise is fraught with uncertainty because high current usage may not translate into future profits when switching costs are low. We argue that the type of user-generated content affects switching costs for the user and, thus, affects the value a platform can capture. Using data about the valuation, traffic, and other parameters from several sources, empirical results indicate greater value uncertainty in platforms with user-generated content than in platforms based on firm-generated content. Platform firms are unable to capture the entire value from network effects, but firms with interaction content can better capture value from network effects through higher switching costs than firms with user-contributed content. Thus, we clarify how switching costs enable value for the platform from network effects and UGC in the absence of formal contracts.

Interoperability – Technical or economic challenge?

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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