Network Effects at Each Diffusion Stage

Abstract

In markets with network effects, the first firm that establishes a large installed base of customers has a decided advantage. Thus, it is important for a firm to gain market share at an early stage of market development. However, it might be wrong for a firm to place too much importance on gaining market share, because some researchers point out that not every successful firm was a first mover. Therefore, further understanding of network effects is required. This study aims to quantitatively clarify the network effects from a hypothetical viewpoint that the impact of network effects on diffusion of service or product may differ at each diffusion stage of market development.