Analysis of Innovative Service Startup under Network Externality and its Relation to the Phase Transition Based on Ising Model

Abstract

It is well known that network externality plays an important role in the growth of many Web services such as SNS. In this kind of market, it has been said that service providing firms must keep initial investment for a while until the market grows.
We studied the growth curve under network externality based on the Ising model. In particular, we investigated the relation between the phase transition and the startup of a service. It was found that the growth curve loses nonlinearity if the system is close to the phase transition but the system still maintains many features of network externality such as the fixed share in the market.