Niche Blueprint

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This game-theory-based matrix can now be examined with different parameter constellations to discover what equilibria form. For our purposes, a particularly interesting and instructive scenario is one where, from a global perspective, it would appear ideal for both actors to adopt the standard, but where, from a decentralized viewpoint, only one of the actors benefits from adopting the standard. Let us look at Fig. 11. It is obvious at first glance that from a global perspective, the ideal situation would be for both actors to standardize.

1 The Penguin Effect According to Farrell and Saloner, the fact that the installed base often hinders the changeover to a technically superior standard is due to informational and resulting 24 2 Economic Principles in the Software Industry coordination problems (Farrell and Saloner 1985). Their reasoning goes like this: The sum of the utilities enjoyed by all market players could be increased, if these opt to transition to a new (technically superior) standard—in our example, if they choose the startup’s software.

2000). 1 Homogeneous Network Effects and Costs of Network Size An important potential extension of traditional network effect theory models relates to assumptions about the dependence of the network effect utility on the number of users. , every additional user leads to a constant utility increase for the users as a whole. However, degressive or progressive functions are equally conceivable. With the former, the nth user produces a smaller utility than the (n-1)th user. With the latter type of function, the nth user produces a greater utility than the (n-1)th.

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