Management and Economics of Network Industries (Technology and Innovation) an der LMU München

Karteikarten und Zusammenfassungen für Management and Economics of Network Industries (Technology and Innovation) an der LMU München

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Lerne jetzt mit Karteikarten und Zusammenfassungen für den Kurs Management and Economics of Network Industries (Technology and Innovation) an der LMU München.

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

On what does the adoption of a network technology depend?

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

Name 5 Strategies that Firms should pursue after winning a standards battle.

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

How did the hardware compatibility vs. software exclusivity in the home video games market change? Why?

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

We defined 3 Degrees of price differentiation. Explain "Third Degree Price Discrimination".

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

We defined 3 Degrees of price differentiation. Explain "Versioning" as a way of "Second Degree Price Discrimination".

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

Is it always a good strategy for a platform to just attract more Producers of complementary products?

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

Name 4 logics common in traditional markets, that are not transferable to platform markets.

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

Explain the Pricing structures of Video games vs. PC operating systems considering the conclusions made in the "Model of Weyl" and the "Model of Hagiu".

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

Does the Pricing structure (how much each side pays) of a Platform market affect the Market outcome (e.g. total volume of transactions)?

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

Gruber and Verboven Study goes deeper into the differences between Countries. Name 2 country specific characteristics.

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

What is the difference between a disequilibrium- and a equilibrium approach?

Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

What happens if you have other choices than just adopting the new technology or not (e.g. different versions of the new technology)?

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Beispielhafte Karteikarten für Management and Economics of Network Industries (Technology and Innovation) an der LMU München auf StudySmarter:

Management and Economics of Network Industries (Technology and Innovation)

On what does the adoption of a network technology depend?

It depends on the observed and the expected network size.

Management and Economics of Network Industries (Technology and Innovation)

Name 5 Strategies that Firms should pursue after winning a standards battle.
Staying on your guard
– technology marches forward
– Every advantage will fade over time if you are not able to improve your technology. –> „lock in“ is not ultimately safe
—> You need a migration path or roadmap for our technology.

Commoditizing Complementary Products
– Once you have won, you want to keep your network alive and healthy
– Encourage a vibrant and competitive market for complements.

Competing with your own installed base
– How can you continue to grow when your product starts to reach market saturation?
–> old problem for durable goods
– Drive innovation even faster

Leveraging your installed base
– Use your installed base to leverage it into using other complementary products of yourself
– but be careful about consumer and rivals’ reactions

Licensing
– Licensing can be considered as a means to win or avoid a standard battle
—> Consumers are less anxious about locking-in to a dominant technology
—> The sponsor can specify the technical details of the technology
—> Securing of suppliers for the new technology
—> may be optimal if expected network benefits are large

Management and Economics of Network Industries (Technology and Innovation)

How did the hardware compatibility vs. software exclusivity in the home video games market change? Why?
Hardware typically incompatible across competitors, i.e. one console cannot run another console‘s games –> But Platform owners have also a decision to let developers run their Games on different platforms or exclusively

– back in the days platform owners had a lot of bargaining power and made the developers be Exlusive. –> BUT: exclusiveness reduced from 40% to 13% over the last 20 years

– Cost structure changed:
–> game development costs skyrocketing
–> porting costs diminishing

– Also positive side effect of non exclusivity for the users (pressure for industry) because of cross platform indirect network effects (online gaming)

Management and Economics of Network Industries (Technology and Innovation)

We defined 3 Degrees of price differentiation. Explain "Third Degree Price Discrimination".
Different prices are charged to different groups of consumers, as the members systematically differ in their price sensitivity (e.g. student discount for mobile tariffs).

–> again important to be careful of the social acceptance (differentiation in Students e.g. nice, but in Mac vs. Windows users not nice)
–> BUT Third-degree price discrimination, as opposed to first-degree price discrimination, is very common on the internet.

Management and Economics of Network Industries (Technology and Innovation)

We defined 3 Degrees of price differentiation. Explain "Versioning" as a way of "Second Degree Price Discrimination".
By offering a number of packages of price and quality levels, the seller can sort consumers according to their willingness to pay.
–> usually marginal difference in production costs of Products but big difference in utility

Widely used in software industry, where often key features from a software are removed to sell a reduced version to consumers with a low WTP.

–> the low Quality Product can also increase the network effects of the high quality product.

Management and Economics of Network Industries (Technology and Innovation)

Is it always a good strategy for a platform to just attract more Producers of complementary products?
– Platform owners typically encourage large numbers of developers for complementary applications
BUT Caution:

– Quality control
– increasing producers also intensifies competition, which may crowd out investment
– Product scope of individual producers remains narrow and unchanged when platform grows –> Importance of specializiation and comparative advantage
– increasing the number of producers decreases innovation incentives

However, number of producers positively affects the variety of applications on the platform..

Solution for most of it is to increase the heterogeneity between producers! (different genres)

Management and Economics of Network Industries (Technology and Innovation)

Name 4 logics common in traditional markets, that are not transferable to platform markets.
1.An efficient price structure should be set to reflect relative costs.

2.A high price-cost margin indicates market power.
–> no, competition needs to be looked at

3.A price below marginal cost indicates predation.
–> low prices can just reflect the value of the other market side..

4.In mature markets, price structures that do not reflect costs are no longer justified.

Management and Economics of Network Industries (Technology and Innovation)

Explain the Pricing structures of Video games vs. PC operating systems considering the conclusions made in the "Model of Weyl" and the "Model of Hagiu".
The „Model of Hagiu“ additionally to the „Model of Weyl“ suggests that the producers become more powerful if there is a high demand for variety in the products –> so they should be charged more fees e.g..

Gaming Consoles:
Developers have high fixed costs and low variable costs (close to zero). So the net benefit of every consumer transaction is quite high (price of a game minus royalties)
–> Consumers have to bear a high price of buying a game. So the net benefit of many consumers is rather low.
–> So Developers pay more than Consumers.
+ demand vor variety is high

PC operating systems:
–> not much demand for variety. So less powerful producers –> the don’t benefit from additional Consumers that much so the developers should pay so much..
–> Operating systems, especially Windows, are sold above costs while developers receive free software development kits and need not pay royalties.

Management and Economics of Network Industries (Technology and Innovation)

Does the Pricing structure (how much each side pays) of a Platform market affect the Market outcome (e.g. total volume of transactions)?
Intuition could lead us to expect the Market outcome not to change.

Why? –> comparison to Taxes in traditional markets.
–> In equilibrium, market outcome is independent of who pays the tax! (Supply or demand side)
–> so if we see taxes as the „fees“ in platform market we could expect the same outcome…

BUT:

We define a two-sided market as one in which the volume of transactions between end-users depends on the structure and not only on the overall level of the fees charged by the platform.

SO in Platform markets the volume of transaction (e.g.) DOES depend on the Pricing structure.

Management and Economics of Network Industries (Technology and Innovation)

Gruber and Verboven Study goes deeper into the differences between Countries. Name 2 country specific characteristics.
1. Waiting list for fixed line connection:
–> A high unsatisfied demand for phones might increase diffusion of mobile phones.
—> Yet, a low relative level of fixed line telephony might hinder diffusion (no-one to call).

Result: A large fixed-line waiting list initially lowers mobile penetration rates but leads to higher growth rates later on.

2. Large fixed network:
—> Might foster diffusion as the utility from owning a mobile phone is high even if the penetration of mobile phones is low.
—>Might hinder diffusion since the need for mobile phones is lower if everyone has a fixed line connection.

Result: A large fixed network has a positive impact on mobile phone diffusion.

Management and Economics of Network Industries (Technology and Innovation)

What is the difference between a disequilibrium- and a equilibrium approach?
2 different basic assumptions on the diffusion process.

disequilibrium approach says, that there is a point in time where not everybody behaves optimally. –> some people adopt, some don’t, even though they should adopt.–> epidemic model suggests that, because the people that don’t know about a new tech would adopt if they just knew…

Equilibrium approach says that at anybody is happy with there decision, even if you tell them about the new tech.
–> probit/rank approach & Strategic approach assume an equilibrium where everybody chooses consciously. –> they differ only in the amount of interaction between adopters

Management and Economics of Network Industries (Technology and Innovation)

What happens if you have other choices than just adopting the new technology or not (e.g. different versions of the new technology)?
If you have to different versions of a tech: the likelyhood of a person really liking one of the too (start the band wagon) gets higher.

confusion effect might get worse though

–> so either a second tech. mekes things worse or makes it better

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