Week 2

Question 1

Why is compatiblilty important when studing networked goods?

Answer 1

Question 2

What is the Hotelling model?

Answer 2

Question 3

How to find the user in the Hotelling model that is indifferent between the two different networks?

Answer 3

Δ = v₀ - v₁, where v_i is the quality of network i

Question 4

What is the solution of the Hotelling model, when using rational expectations?

Answer 4

Question 5

How to determine the price sensitivity in the hotelling model?

Answer 5

Question 6

When is either network active when assuming weak network effects (in the Hotelling model)?

Answer 6

Question 7

When is either network active when assuming strong network effects (in the Hotelling model)?

Answer 7

Question 8

How to we maximize profits in the Hotelling model, with weak network effects?

Answer 8

Question 9

What is the impact of β₀ and β₁ on the price and quantity in the Hotelling model with weak network effects?

Answer 9

Question 10

• When are the network effects in the Hotelling model so strong that it breaks the law of demand?
• What would a company do to avoid the risk of no one joining?

Answer 10

Question 11

What are the assumptions and simplifications we make when we want to check if a private network wants to be compatible with a non-profit network?

What would x^tilde be which is indifferent between the two networks?

Answer 11

Question 12

When does a private company want to be compatible with a non-profit network? How is it derived?

Answer 12

Question 13

What is the intuition behind a private network being made compatible with a non-profit network?

Answer 13

Question 14

What are the effects of compatibility on users of a network?

Answer 14