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Article
Firm value in emerging network industries
in Information Economics and Policy, 26 (1)
ISSN : 0167-6245Voir la revue «Information Economics and Policy»
This paper examines emerging industries that exhibit positive network effects. We put forward a dynamic model in which two technologies compete to be the standard. The model provides a quantitative method for the valuation of firms. We use the model to examine the relationship between network effects, consumer heterogeneity, and prices. We show that the firm value depends strongly on the particular choice of the network strength function. We compare three types of such functions, identify
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shortcomings of traditionally used ones, and propose a more realistic one.
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