Network Economies

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Network Economies by Mind Map: Network Economies

1. Definition: a product of the network effect, in which the value of a good or service increase with the number of users

1.1. The traits of network economies lead to them being key information economies.

1.2. Create benefits from feedback from customers

2. Positive feedback

2.1. "makes the strong grow stronger...and the weak grow weaker" (Shapiro and Varian, 176)

2.2. "Leads to dominance by a single firm or technology" (Shapiro and Varian, 176)

3. Negative Feedback

3.1. "Makes the strong weaker and the weak stronger" (Shapiro and Varian, 176)

3.2. Creates a balanced equilibrium rather than a single dominant company (Shapiro and Varian 176)

4. "Build alliances to ignite feedback in the network economy" (Shapiro and Varian, 201)

4.1. Alliances formed to promote a specific technology (Shapiro and Varian, 201)

4.2. Negotiated for "control of the existing base, technical superiority, and intellectual property rights" (Shapiro and Varian, 202)

4.3. Example: Microsoft office licenses on Mac, Dell, etc. computers

5. 4 strategies for network markets: performance play, controlled migration, open migration, and discontinuity (Shapiro and Varian, 225)

5.1. These stragies are divided by performance/compatibity and openness/control dimensions

5.2. the strategies are affected by the size of the companies using them

6. Social media is an example of a network economy

6.1. The value of Facebook or any other social netwrok is  determined by the number of users

6.2. People will not use a network that their friends are not using

7. Social media's connections with network economies tie network economies to social media marketing

7.1. Social media marketing creates engagement between users and marketing companies

7.2. "numerous interactions allow you to garner feedback from your communities" (, 205)