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Network Externality: An Uncommon Tragedy
Open accessAbstract
Economists have defined ‘network externality’ and have examined putative inframarginal market failures associated with it. This paper distinguishes between network effects and network externalities, where the latter are market failures. The authors argue that while network effects are important, network externalities are theoretically fragile and empirically undocumented. Some network externalities are merely pecuniary. Network ownership or transactions among network participants can internalize some network effects. The type of market failure that has been associated with these externalities is a transition problem that has little to do with externality.
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Citations
Cites
Coase, R. H. (1960) · The Journal of Law and Economics · doi:10.1086/466560 · Cited by 18,255
Path Dependence, Lock-In, and History
(1995) · The Journal of Law, Economics, and Organization · doi:10.1093/oxfordjournals.jleo.a036867 · Cited by 1,175
Self-citation
Cited by
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Cennamo, C., & Santalo, J. (2013) · Strategic Management Journal · doi:10.1002/smj.2066 · Cited by 780
Network effects and competition: an empirical analysis of the home video game industry
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Frame, W. S., & White, L. J. (2004) · Journal of Economic Literature · doi:10.1257/002205104773558065 · Cited by 423
Price Fluctuations and the Use of Bitcoin: An Empirical Inquiry
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Metadata
- Authors
- Liebowitz, S. J., & Margolis, S. E.
- Venue
- Journal of Economic Perspectives
- Publisher
- American Economic Association
- Published
- 1994-05-01
- Volume
- 8
- Issue
- 2
- Pages
- 133-150
- ISSN
- 0895-3309 (ISSN-L)
- OpenAlex
- W2031698600
- Cited by
- 1,064
- References
- 2
- FWCI
- 74.07
- Type
- journal article
- Language
- en
- Open access
- bronze
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- Liebowitz, S. J., & Margolis, S. E. (1994). Network Externality: An Uncommon Tragedy. Journal of Economic Perspectives. https://doi.org/10.1257/jep.8.2.133
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
