The Role of Critical Mass in Establishing a Successful Network Market: An Experimental Investigation

The Role of Critical Mass in Establishing a Successful Network Market: An Experimental Investigation
Date: 2015-05-12
By: Bradley J. Ruffle, Avi Weiss, Amir Etziony (Wilfrid Laurier University)
URL: http://d.repec.org/n?u=RePEc:wlu:lcerpa:0092&r=net
A network market is a market in which the benefit each consumer derives from a good is an increasing function of the number of consumers who own the same or similar goods. A major obstacle that plagues the introduction of a network good is the ability to reach critical mass, namely, the minimum number of buyers required to render purchase worthwhile. This can be likened to a coordination game with multiple Pareto-ranked equilibria. Through a series of experiments, we study consumers’ ability to coordinate on purchasing the network good. Our results highlight the central importance of the level of the critical mass. Neither an improved reward-risk ratio through lower prices nor previous success at a lower critical mass facilitates the establishment of a network market when the critical mass is sufficiently high.
Keywords: experimental economics, network goods, coordination game, critical mass
JEL: C92 L19

發表迴響

在下方填入你的資料或按右方圖示以社群網站登入:

WordPress.com 標誌

您的留言將使用 WordPress.com 帳號。 登出 /  變更 )

Google photo

您的留言將使用 Google 帳號。 登出 /  變更 )

Twitter picture

您的留言將使用 Twitter 帳號。 登出 /  變更 )

Facebook照片

您的留言將使用 Facebook 帳號。 登出 /  變更 )

連結到 %s