Information gathering externalities in product markets1

Information gathering externalities for a multi-attribute good1

Most goods and services vary in numerous dimensions. Customers choose to acquire information to assess some characteristics and not others. Their choices affect firms’incentives to invest in quality and so lead to indirect externalities in consumers’choices. We illustrate these ideas by characterizing a model in which a monopolist invests in the quality of a product with two characteristics, an...

Information And Communication Technology Externalities And Economic Growth In Newly Industrialized Countries

The pivotal role of network externalities in software systems:

Network externalities are the effects on the value of a product that can be ascribed to the presence of a network of users of such product. They play an essential role in the business success of any product. The authors think that such role is even larger in the software industry, where (a) documentation and effective training often lack, and (b) consumers regard as major benefits interoperabil...

Policies influencing the diffusion of instant messaging

Many information and communication products show characteristics that are called network effects or positive demand externalities, i.e. their utility for users depends on how many other people also use the product. The paper investigates the diffusion of such products. Instant messaging is taken as an example. Strategic options of the players in the instant messaging market are presented and an...

Versioning information goods with network externalities

Positive externalities characterize the consumption of a majority class of information goods and services such as software, e-mail, and online content and services including virtual communities. We show that network externality is critical for the market segmentation and product line decisions of an information goods seller. With externality, a monopoly of multiple existing products offers exac...