What is a network externality and how does it differ from a typical externality

Question

What is a network externality and how does it differ from a typical externality Explain why a network demand curve slopes upward for small quantities. List three strategies a firm can use to segment its market for a network good. True or False: Once a firm's network good becomes the market leader, it is extremely unlikely for the firm to lose that position within a five year period. Explain. Why does the 3DTV industry exhibit large economies of scale? Would there also be network externalities in the consumption of 3DTVs? Explain. If Matt wants to use his AT&T; iPhone to call his girlfriend Sue, who uses a MyTouch from T-Mobile, why is interconnection necessary for the call to be completed?

Explanation / Answer

The network demand curve depicts the initial increase in the value of the good with the increased consumption or sale of the good. This will reflect that at the lower quantities, the demand curve will have an upward slope.

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