Network Externalities Research Articles

Network externalities in the long-term performance of ICOs

This study examines the impact of technology and network externalities on exchange-listed Initial Coin Offerings (ICOs). Utilising an online database comprising of self-reported ICO characteristics, measures of post-ICO performance, along with information on business social networks, higher fundraising figures are found to contribute positively to the ICOs long-term success. This positive impact is multiplied by six times when fundraising is conducted to an existing, proprietary blockchain. This is explained by the network effect. The modified information ratio measure is used to approximate the quality signalling of ICO organisations using price time series and benchmarking these to already functioning blockchain technology, e.g. ethereum in the long term. The ICO sample's mean trading period on an exchange is 1.5 years and is used for long-period asset analysis. Additionally, the cointegration to the market technology benchmark is found to have a large, significant negative effect on long-term ICO organisational success as this indicates lower ICO intrinsic value.

Collusion in Technical Development: A Perspective on EC’s Emission Cleaning Judgement

In July 2021, the European Commission (EC) came out with a decision in a matter involving the issue of collusion in technical development with reference to emission cleaning for new diesel passenger cars. The said decision is the first of its kind, wherein the EC ruled that meeting of minds amongst competitors placed at a horizontal level with a view to limit technical development and competition on innovation in the area of emission cleaning technologies for passenger cars amounts to cartelisation, leading to the imposition of penalty on the five colluding parties. Taking clues from the above ruling of EC, this paper, by using doctrinal research methods, establishes a parallel between technology lock-in, network externalities, and collusion in technical development so far as their anti-competitive outcomes are concerned and provides that, in both technological lock-in and technical collusion, markets fail to produce efficient/competitive outcome. The paper supplements existing literature by advocating prompt regulatory intervention in both situations to correct market aberrations. Even though the ruling under reference relates to emission cleaning technologies for passenger cars, similar conduct may be present in other sectors. Accordingly, the paper suggests prompt regulatory action by competition authorities to ensure effective competition in the technology and innovation fields and for the benefit of society as a whole through the availability of innovative products at competitive prices and favourable impact on the environment.

Network Externalities and Downstream Collusion under Asymmetric Costs: A Note

This paper considers the collusive stability of downstream competition in a vertical market with network externalities and cost asymmetry. A dynamic collusion game is constructed, and backward induction is employed to solve the subgame perfect Nash equilibrium. We show that larger network externalities lead to less collusive incentive for an inefficient firm, while for an efficient firm, this depends on the efficiency gap. An increase in network externalities will destabilize the downstream collusion when the cost asymmetry is large and network externalities are relatively weak.

Sustainable crowdsourced delivery: A study of technological, health, value, and trust antecedents of consumer loyalty

Crowdsourced delivery has various advantages over conventional delivery methods, including a decrease in emissions and road congestion. These benefits grow as consumer loyalty is established due to network externalities. This study seeks to identify the factors influencing customer loyalty to crowdsourced delivery through the unified theory of acceptance and use of technology, the health belief model, the perceived value theory, and the trust theory. First, a questionnaire was administered to 500 respondents in Singapore, and the data was analyzed using structural equation modeling. The findings show that technology and health belief constructs have direct impacts on the perceived value of crowdsourced delivery, while perceived value has direct and indirect effects on consumer loyalty through trust. Overall, this study contributes to the literature theoretically and practically by developing a paradigm for understanding the growth of customer loyalty to crowdsourced delivery from the perspectives of consumers and health beliefs. It also offers operators and policymakers concrete areas for improvement in resource allocation, security, and marketing to increase overall consumer loyalty to crowdsourced delivery.

Pricing and Sales Effort Decisions in a Closed-Loop Supply Chain Considering the Network Externality of Remanufactured Product

Considering the network externality of remanufactured product, this paper develops the Stackelberg game models in a closed-loop supply chain (CLSC) consisting of an original equipment manufacturer (OEM) and a retailer with dual sales channel under three scenarios, i.e., no sales effort (Model N), the retailer exerting sales effort (Model R) and the OEM exerting sales effort (Model M). The study investigates the pricing and sales effort decisions for CLSC members. The results show that: (1) Compared with no sales effort, the sales effort behavior can always improve the profits of the OEM and entire CLSC. The retailer’s profit can be improved in Model R, so OEM exerting sales effort could cause a loss for the retailer and the sales effort behavior can promote the sales of remanufactured products and further cannibalize the new product market. (2) Model M is more favorable to improve the profits of the OEM and entire CLSC, while the retailer prefers Model R. Model M is more beneficial for boosting the sales of remanufactured products. (3) As the network externality/consumer’s sensitivity of sales effort becomes more obvious, CLSC members exert more sales effort, and the OEM exerts more sales effort compared to the retailer. (4) Only when the retailer’s sales effort cost is much lower than the OEM sales effort cost is it that OEM could obtain more profit when the retailer exerts sales effort; then, the win-win situation between OEM and the retailer is achieved.

Research on Time to Market and Pricing of Platform Products in a Competitive Environment

Platforms are gradually becoming important business organization models, and platforms with bilateral market characteristics such as payment platforms and online shopping platforms are gradually penetrating people’s lives. Freemium content mostly exists in particular platforms such as online video platforms, etc. Platforms need to balance upstream and downstream markets when formulating strategies. This paper is the first to explore the time-to-market and pricing strategies of products in bilateral markets. By connecting upstream and downstream markets through cross-network externalities, we construct a system dynamics model of the problem, simulate the diffusion process of new product launches, and solve the problem of the optimal time to market and optimal pricing of the product. The simulation analyzes the effects of different parameters on the optimal time-to-market and pricing strategies, and comparing the diffusion in a unilateral market, we find that in a competitive market environment, the time-to-market and pricing of products are influenced by exogenous variables such as network externalities, and firms can promote their products more efficiently by changing the marketing mix strategy of platform product benefits and quality reputation. Meanwhile, the results obtained by considering bilateral markets when developing strategies for platform-based companies can lead to higher returns.

The Mechanism Behind Urban Population Growth and Shrinkage from the Perspective of Urban Network Externalities

The Mechanism Behind Urban Population Growth and Shrinkage from the Perspective of Urban Network Externalities

Multihoming effect on the two-sided platform of second-hand cars

With the development of circular economy, second-hand cars are becoming important in the sustainable transportation. Due to the participation of many e-tailers, the platform competition of second-hand cars is increasingly strong in the two-sided market. Considering the network externality and product differentiation on the second-hand car platform, this study sets up a stylized model to analyze the multihoming effect for heterogeneous consumers and solves the equilibrium pricing strategy and quality decision in the online collecting market and reselling market. The numerical experiments examine the impact of two types of customer heterogeneity on the customer’s demand and platform’s profit. Our findings show that the customers close to each platform have the single-homing effect, otherwise they have the multihoming effect. As a result, the platform’s profit increases with the customer’s heterogeneity towards two second-hand platforms but is the same with the customer’s heterogeneity towards two online markets. Furthermore, we provide some managerial insights for all the stakeholders on the two-sided platform of second-hand cars.

Exploring the agricultural platforms: do complementarity and situational normality ameliorate farmers' trust?

PurposeAlthough Agtech firms have promoted digital platforms for retailing farm supplies (RFS), farmers are sceptical while purchasing them online. As a result, they struggle to generate a sustained demand. Among other approaches, these platforms onboard complementors to become full-stack farming solution providers. Whether platform complementarity can induce farmers' trust remains ambiguous. Literature on network externality theory highlights that complementarity positively affects the perceived value for buyers. The sociotechnical systems literature indicates that perceived value is an antecedent of user trust. In this vein, the authors ask: Does perceived complementarity affect farmers' trust in the RFS platform? Alternatively, the Agtech firms augment the platform's look and feel to make the digital retail setting appear “normal” to farmers. The extant research on the social cognitive theory indicates that a retail setting conforming with the generalised expectancy of buyers harbours their trust. Against this backdrop, the authors ask whether situational normality affects farmers' trust in the RFS platform.Design/methodology/approachThe study is based on a questionnaire survey of 212 Indian farmers using RFS platforms. The data were analysed using structural equation modelling (SEM) analysis.FindingsThis study establishes that platforms' complementarity and situational normality ameliorate farmer trust. The authors also identify the socioeconomic factors shaping the farmers' trust in platforms.Research limitations/implicationsThe present study has taken all RFS together as a single umbrella category, which can be considered a limitation. Also, the study is based on the cross-sectional survey of RFS platform users; the farmers' attitudes are dynamic in nature and evolve over time; however, the temporal factors shaping the farmer attitudes have not been considered in this study.Originality/valueThe study establishes the epistemological relationship between complementarity, situational normality and farmers' trust in agricultural platforms.

Understanding people's intention to use facial recognition services: the roles of network externality and privacy cynicism

PurposeBased on the cognition–affect–conation pattern, this study explores the factors that affect the intention to use facial recognition services (FRS). The study adopts the driving factor perspective to examine how network externalities influence FRS use intention through the mediating role of satisfaction and the barrier factor perspective to analyze how perceived privacy risk affects FRS use intention through the mediating role of privacy cynicism.Design/methodology/approachThe data collected from 478 Chinese FRS users are analyzed via partial least squares-based structural equation modeling (PLS-SEM).FindingsThe study produces the following results. (1) FRS use intention is motivated directly by the positive affective factor of satisfaction and the negative affective factor of privacy cynicism. (2) Satisfaction is affected by cognitive factors related to network externalities. Perceived complementarity and perceived compatibility, two indirect network externalities, positively affect satisfaction, whereas perceived critical mass, a direct network externality, does not significantly affect satisfaction. In addition, perceived privacy risk generates privacy cynicism. (3) Resistance to change positively moderates the relationship between privacy cynicism and intention to use FRS.Originality/valueThis study extends knowledge on people's use of FRS by exploring affect- and cognitive-based factors and finding that the affect-based factors (satisfaction and privacy cynicism) play fully mediating roles in the relationship between the cognitive-based factors and use intention. This study also expands the cognitive boundaries of FRS use by exploring the functional condition between affect-based factors and use intention, that is, the moderating role of resistance to use.

The impact of e-commerce and R&D on firm-level production in China: Evidence from manufacturing sector

E-commerce provides opportunities to extend the market and plays a vital role in modern economy. However, its implementation often requires high-level technical infrastructure. This study regards both e-commerce and R&D as input factors and analyses their impact on firm output in the manufacturing sector of China. We find that e-commerce capital stocks and R&D capital stocks have a significant positive effect on the output growth, with R&D being more influential than e-commerce. Meanwhile, the inter-industry network externalities of e-commerce capital stocks have a significant positive impact on production growth. Still, the intra-industry network externalities of e-commerce capital stocks are significantly negative, which means online purchase and sales through e-commerce may induce product imitation (i.e., business stealing) and, thus, reduce output for certain companies in the industry. These findings suggest that R&D and favourable external innovation environment are the key factors for enhancing enterprise production levels.

Analysis of the Impact of Third-party Payment on Currency Demand

With the rapid popularization of mobile Internet, mobile offline third-party payment has penetrated into all aspects of daily transactions, and has a profound impact on people's consumption habits, payment methods and original financial management concepts. According to the view of network economy in microeconomics, the growing third-party mobile payment has produced considerable positive network externalities. With the continuous expansion of payment scope, payment objects have produced economies of scale, and marginal costs have fallen, thus obtaining considerable competition. force. As the direct target of third-party mobile payment, cash is inevitably replaced. Previous researches usually focused on macroeconomic indicators such as currency creation multiplier and cash leakage rate for mobile payment for macro analysis. This article will analyze the corresponding changes in different types of currency demand under the continuous impact of third-party payment according to the classification of currency demand levels, and explore the impact of the resulting monetary demand structure and the impact on the role of macro monetary policy.

Do direct and indirect network externalities matter? Unpacking the causal antecedents of perceived gratifications and user loyalty toward mobile social media

PurposeBy building and examining an integral model, the principal objectives of this research are to systematically explore how indirect and direct network externalities lead to user loyalty toward WeChat through the mediating effect of perceived gratifications.Design/methodology/approachThe data were collected through an online survey of 688 young people in Mainland China. To empirically assess the conceptual model, zero-order correlation analyses and structural equation modeling were carried out utilizing web-based data.FindingsPath analysis results demonstrate that indirect network externalities and direct network externalities exert a significant impact on users' hedonic gratifications and utilitarian gratifications. Moreover, the study discovers the significant mediating influences of utilitarian gratifications on the association between indirect network externalities and user loyalty.Research limitations/implicationsTheoretically, this article may extend the scope of diverse studies on the association between network externalities and perceived gratifications and offer fresh insights into how mobile social media could actually improve user loyalty through enhancing perceived values among younger generation. Practically, this research assists mobile social media practitioners in retaining users and gaining competitive advantages over rival applications.Originality/valueAlthough the extraordinary growth of WeChat has successfully become the dominant media by which individuals develop interpersonal network and contact with others, the roles of perceived gratifications between network externalities and user loyalty toward WeChat have not yet been investigated in depth. These obtained outcomes not only enrich the existing literature regarding the relationship between network externalities and affective response, but also offer fresh insights to mobile social media designers, marketers and users.

Global digital platforms, technology transfer and foreign direct investment policies in two‐sided markets

AbstractThis paper examines the preferences of a foreign firm and a host country government over two modes of FDI in two‐sided markets: de novo entry (through the establishment of a new platform) and acquisition of the domestic incumbent platform. Technology transfer, cross‐side network externalities and platform service differentiation determine the ranking of the host country welfare gains and the entrant's profits under the two entry modes. In the case where the foreign entrant and the host government disagree over the entry modes ranking, asymmetric foreign equity restrictions can induce the welfare‐optimal choice of the entry mode by the foreign firm.

Multi-agent, multi-site resource allocation under quotas with a Stackelberg leader and network externalities

We model multi-agent resource allocations consisting of many agents and sites, analyze serial dictatorship and simultaneous allocation approaches, and then apply them to an actual case of mussel harvesting. For tractability, the model is developed in the context of a multi-fisher, multi-site fishery where one fisher may emerge as a Stackelberg leader while the rest are followers, but the generalized model can be used to study many other resource allocation problems. Network externalities are introduced in the form of congestion costs, and management systems based on individual and collective quotas are analyzed. The presence of a Stackelberg leader is a novel approach that extends results obtained in resource allocation and indicates the possibility of full elimination of followers, with impacts on the sustainability of fishing communities. We compare allocation outcomes under different assumptions and discuss policies that could prevent the followers from exiting the market.

Analysis of Digital Adoption Capability and Perceived Product Advantage on Network Externalities and Sustainable Business Growth on MLM in Indonesia

The problems of the MLM industry in Indonesia include: MLM companies do not have strategic flexibility and sensitivity to dynamic markets. This study will determine the effect of Training and Development, Compensation and Reward System, Digital Adoption Capability and perceived Product Advantage on Network Externalities and Sustainable Business Growth. The method used in this study is a quantitative research method. The process of collecting data using a questionnaire is carried out once in a certain time span without repetition, namely one shoot cross-sectional, so that a total sample of 319 MLM companies is obtained. The results show that Training and Development has a positive effect on Sustainable Business Growth, Training and Development has a positive impact on Network Externalities, Compensation and Reward System has a positive effect on Sustainable Business Growth, Compensation and Reward System have a positive impact on Network Externalities, Digital Adoption Capability does not affect Sustainable Business Growth, Digital Adoption Capability has a positive effect on Network Externalities, perceived Product Advantages have no effect on Sustainable Business Growth, perceived Product Advantages have no effect on Network Externalities, and Network Externalities have a positive effect on the Company's sustainable business growth. The novelty of this research is that it is found that Research on the MLM Industry has continued to grow in the last 24 years but not significantly, the MLM business globally and nationally continues to grow. The number of articles is still very limited, so references in the MLM industry are limited. The contribution of this research is that MLM companies and their management teams also get additional references to develop a solid framework to increase the growth of sustainable MLM business in Indonesia.

Gains and Losses of Key Opinion Leaders’ Product Promotion in Livestream E-commerce

In livestream e-commerce, many brand-owners use the key opinion leaders (KOLs) for product promotion and sales, especially in the direct-selling channel. Is such a practice really beneficial to the brand-owner? In practice, we even observe that KOLs sell and then return products for a strong network externality. Therefore, to formulate the brand-owner's tradeoffs of using KOLs, we compare the brand-owner's profits with and without a KOL (i.e., brand-owner uses a KOL for product promotion vs. brand-owner invests in product promotion by itself) in a dual-channel system comprised of the brand-owner's direct-selling channel and its traditional retail channel. We find the brand-owner's gains/losses of using the KOL highly depend on the commission rate, retain rate and the network externality intensity. Interestingly, we reveal that the enhanced KOL effect might not be necessarily beneficial to the brand-owner and can even hurt it significantly. As the channel rival, the retailer may benefit from the brand-owner's using the KOL (because its procurement cost may be lowered) and the market expansion (because the use of KOL may spill over to the retail channel).

A MULTILAYER VIEW OF SYSTEMIC IMPORTANCE AND AGGREGATE FLUCTUATIONS

AbstractEconomic systems are composed of multiple interrelated groups of agents and with multiple sources of network externalities present. This can give rise to novel systemic risks. We propose a multilayer model to understand this phenomenon. The model features complementary or substitutionary actions of agents active in multiple groups and extends the network concepts of systemic importance and microinduced aggregate fluctuations to their multigroup counterparts. The multilayer allows for the propagation of shocks through both intra‐ and interlayer margins. The interlayer margin can be large enough to induce a reordering of systemic importance indicators as compared to singular group considerations, and produce volatility levels that are larger than economies consisting of a single group of agents.

The role of surcharge policy on a ride-hailing service platform with long-distance drivers

Many ride-hailing service platforms have launched a surcharge policy to schedule long-distance drivers to meet demand during regionally peak demand periods. When someone is unwilling to wait in line until there exists an idle local driver to match, he/she would choose the surcharge policy to quickly match long-distance drivers and get fast service through paying a surcharge. With heterogeneous congestion-sensitive customers and reservation rates of local and long-distance drivers, this paper explores the role of the surcharge policy for a ride-hailing service platform's profit, consumer surplus and driver surplus. We find that when the potential demand increases, the platform sets a lower surcharge to shift the demand to those customers with the surcharge policy. Influenced by network externalities, increasing the number of long-distance drivers causes the platform to initially increase and then decrease the surcharge. There exists a threshold of the number of local drivers, below which the platform under the surcharge policy can gain a higher profit than the situation without the surcharge. However, only the surplus of customers who choose to wait for local drivers is beneficial, while other customers and drivers suffer losses, indicating that the proposed policy cannot result in an all-win outcome for all parties.

Unpacking Detrimental Effects of Network Externalities on Privacy Invasion, Communication Overload and Mobile App Discontinued Intentions: A Cognition-Affect-Conation Perspective.

Recently, mobile apps are rapidly emerging as an important information instrument, with the potential to boost convenience and efficiency in everyday life. The adoption of mobile apps can exert a positive influence on individuals, but also lead to adverse perceptions in different ways. The crucial issue arising is what motivates people's discontinued use of such services. Furthermore, the roles of communication overload and privacy invasion between network externalities and discontinued use intentions have not been thoroughly examined. The primary objective of this article is to investigate if negative network externalities may result in privacy invasion, communication overload and discontinued intentions, and how the underlying mechanism operates. This current research collected and evaluated data from 696 mobile app users utilizing the structural equation model (SEM) technique. The findings demonstrate that perceived critical mass and perceived complementarity positively affect the privacy invasion of mobile app users. Particularly, it was discovered that privacy invasion and communication overload mediate the association between network externalities and mobile app discontinued use intentions. This article may not only enrich the ongoing contemporary critical discussion on new information technology usage, but also offer significant theoretical and practical implications for mobile app researchers and practitioners.