Direct and indirect network effects are equivalent: A comment on direct and indirect network effects: Are they equivalent?

Jeffrey Church, Neil Gandal

Research output: Contribution to journalArticlepeer-review

Abstract

Clements (2004) makes the following two claims: (i) unlike direct network effects, increases in the size of the market do not, in the case of indirect network effects, make standardization more likely, but (ii) indirect network effects are associated with excessive standardization. We show in Clements' framework that neither of these results are correct: standardization is more likely as the number of software firms increases and when the type of market equilibrium is unique - there are only multiple networks or only standardization - there is never excessive standardization, but there could be insufficient standardization, just as is the case with direct network effects.

Original languageEnglish
Pages (from-to)708-712
Number of pages5
JournalInternational Journal of Industrial Organization
Volume30
Issue number6
DOIs
StatePublished - Nov 2012

Keywords

  • Network effects
  • Network externalities

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