Issue No.05 - September/October (2004 vol.21)
Glenn J. Browne , Texas Tech University
This paper describes network effects in technology industries. Specifically, we show that network effects can lead to a "social dilemma," in which the actions of consumers can result in serious negative consequences for the same consumers and the society as a whole in the long term. We use a social planner?s view of markets to describe the social surplus that can be gained by all firms and consumers in a market. We use theories from economics, social sciences, and biology to argue that technology markets require proactive measures to increase the social surplus. We discuss network effects in the short term and long term, describing the costs and benefits. We then offer potential solutions to social dilemma problems, and conclude with prescriptions for governments and organizations.
network effects, social dilemmas, standards, monopolies
Glenn J. Browne, "Network Effects and Social Dilemmas in Technology Industries", IEEE Software, vol.21, no. 5, pp. 44-50, September/October 2004, doi:10.1109/MS.2004.1331301