01 December 2005

Price's Law and the Downside of Network Effects

We have discussed network effects from time to time. Here is an interesting article that gives a little more definition to the phenomenon. Price's law appears to be more focussed on content, with more applicability to the "web 2.0" phenomena. Do you think that Price's Law also applys to the network effects experienced in the telecommunications industry? To think this through, take a look at your own consumption behavior where network effects exist (IM, mobile phones, etc.). You might also revisit the historical access competition era in the US (1892-1912). If Price's Law holds in this domain, what implications would that have on policy, especially for developing countries?

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