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Chapter 26: Q. 11 - Problems (page 598)

List three products that you think are subject to network effects. For each product, indicate whether, in your view, all or just a few firms within the industry that produces each product experience market feedback effects. In your view, are any market feedback effects in these industries currently positive or negative?

Short Answer

Expert verified

(1) Network effects affect three products: mobile companies, internet websites, and mobile applications.

(2) Currently, the market feedback effects are positive because one person's consumption is likely to encourage others to consume these goods. As a result, overall consumption rises.

Step by step solution

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01

Given information

The given sentences are : (1).

The three products which are subject to network effects are mobile company,

02

Explanation (1) 

Mobile companies, internet websites, and mobile applications are the three products that are affected by network effects.

People are more likely to purchase goods and services if they are also preferred by others. One person's consumption of these goods encourages others to consume.

03

Given information 

The given sentences are : (2)

The firms producing network goods need to consider the market feedback effects

04

Explanation (2)

Companies that manufacturenetworked products need to considerthe feedbackeffect of the market. If the market reaction is positive, thecompany should increaseproduction. These industries have both positive and negative market feedback effects. Currently, the market feedbackeffect is positive becausethe consumption of oneperson can inspire others to consumethose products. This will increase total consumption .

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