Lecture 8

Question 1

What is a network effect?

Answer 1

Means that the value of a network increase as its number of users does. So each additional user in the network increases the value of the network for other users.

Question 2

What is Matcalfe’s law?

Answer 2

V = n sqaured

Question 3

What is a congestion effect?

Answer 3

It is a negative network effect. Each addition to the network actually reduces the value of the network. eg. traffic jam or bandwith

Question 4

Three value sources in a network?

Answer 4

1. Exchange: a larger number of users results in a greater reach for exchanging products and services
2. Staying Power: a larger number of users suggests a strong market position. Linked to switching costs.
3. Complementary benefit: Additional third party products that provide additional value to the network users

Question 5

What is meant by platform ecosystem? and how does this create an exchange of value?

Answer 5

Platforms actively encourage third-party providers to integrate products and services (apps) with their software, creating ecosystems.

Question 6

What is an application programming interface (API)?

Answer 6

makes it easy to fit a product to a platform software.

Question 7

What is a one-sided market?

Answer 7

large share of value of derived from a single class of users

Question 8

What is a two-sided market?

Answer 8

Value is derived from two categories of network users

Question 9

Same side exchange benefit?

Answer 9

increasing value to a class of users resulting from an increase in the number of users of that class.

Question 10

cross side exchange benefit?

Answer 10

increasing value to a class of users resulting from an increase in the number of users of another class.

Question 11

Positive feedback loops

Answer 11

An increase in A leads to an increase in B which leads to an increase in A

Question 12

What does servitize mean?

Answer 12

to become the dominant platform provider the provides the product as a service