Main Menu Previous Topic Next Topic
In their 1985 article, Katz and Shapiro capture the basic effects of network externalities in a market economy. They discuss the various types of Fulfilled Expectations Cournot Equilibria that result from their model. This tutorial offers a way to search for these equilibria, and visualize some of the key results of the article. We also use our simulations to demonstrate the key concept of excess inertia, as it is presented by Farrell and Saloner.
Network externalities are somewhat related to the idea of informational cascades. This concept is discussed in another tutorial in this simulator. Both tutorials aim to explain situations in which a large number of people make the same decision, such as when many consumers buy a monopolist's product in this tutorial. Further research may seek to address situations in which both network externalities and informational cascades come into play.
Of course, you are encouraged to attempt such inquiries yourself. The simulations presented here are only a fraction of those that are possible. Many variations on these simulations can be constructed from the main simulator console.
Previous Slide Next Slide