IDEAS home Printed from https://ideas.repec.org/a/kap/netnom/v15y2014i1p1-8.html
   My bibliography  Save this article

Metcalfe’s law: not so wrong after all

Author

Listed:
  • Leo Hove

Abstract

Briscoe et al. IEEE Spectrum, 43(7), 34–39 ( 2006 ) claim that Metcalfe’s law is “wrong”. One of their arguments is that “if Metcalfe’s Law were true, then two networks ought to interconnect regardless of their relative sizes”. This paper shows that this argument is flawed. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Leo Hove, 2014. "Metcalfe’s law: not so wrong after all," Netnomics, Springer, vol. 15(1), pages 1-8, July.
    • Handle: RePEc:kap:netnom:v:15:y:2014:i:1:p:1-8
    DOI: 10.1007/s11066-014-9084-1
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11066-014-9084-1
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11066-014-9084-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Madureira, António & den Hartog, Frank & Bouwman, Harry & Baken, Nico, 2013. "Empirical validation of Metcalfe’s law: How Internet usage patterns have changed over time," Information Economics and Policy, Elsevier, vol. 25(4), pages 246-256.
    2. Matutes, Carmen & Padilla, A. Jorge, 1994. "Shared ATM networks and banking competition," European Economic Review, Elsevier, vol. 38(5), pages 1113-1138, May.
    3. Esser, P. & Leruth, L., 1988. "Marketing Compatible, Yet Differentiated Products: In Search Of Competitive Equilibria When Network Externalities Are At Work," Papers 8807, Universite Libre de Bruxelles - C.E.M.E..
    4. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    5. Tingting He & Dmitri Kuksov & Chakravarthi Narasimhan, 2012. "Intraconnectivity and Interconnectivity: When Value Creation May Reduce Profits," Marketing Science, INFORMS, vol. 31(4), pages 587-602, July.
    6. Joseph Farrell & Carl Shapiro, 1988. "Dynamic Competition with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 123-137, Spring.
    7. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    8. Katz, Michael L & Shapiro, Carl, 1986. "Product Compatibility Choice in a Market with Technological Progress," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 146-165, Suppl. No.
    9. Joseph Farrell & Garth Saloner, 1985. "Installed Base and Compatibility With Implications for Product Preannouncements," Working papers 385, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    11. Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
    12. Jinhong Xie & Marvin Sirbu, 1995. "Price Competition and Compatibility in the Presence of Positive Demand Externalities," Management Science, INFORMS, vol. 41(5), pages 909-926, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Leo Van Hove, 2016. "Measuring the value of mobile telecommunications networks," Netnomics, Springer, vol. 17(3), pages 191-222, November.
    2. Van Hove, Leo, 2016. "Testing Metcalfe's law: Pitfalls and possibilities," Information Economics and Policy, Elsevier, vol. 37(C), pages 67-76.
    3. Pele, Daniel Traian & Mazurencu-Marinescu-Pele, Miruna, 2019. "Metcalfe's law and herding behaviour in the cryptocurrencies market," Economics Discussion Papers 2019-16, Kiel Institute for the World Economy (IfW Kiel).
    4. Pele, Daniel Traian & Mazurencu-Marinescu-Pele, Miruna, 2018. "Cryptocurrencies, Metcalfe's law and LPPL models," IRTG 1792 Discussion Papers 2018-056, Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series".

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. De Bijl, Paul W. J. & Goyal, Sanjeev, 1995. "Technological change in markets with network externalities," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 307-325, September.
    2. Matutes, Carmen & Regibeau, Pierre, 1996. "A selective review of the economics of standardization. Entry deterrence, technological progress and international competition," European Journal of Political Economy, Elsevier, vol. 12(2), pages 183-209, September.
    3. Deishin Lee & Haim Mendelson, 2007. "Adoption of Information Technology Under Network Effects," Information Systems Research, INFORMS, vol. 18(4), pages 395-413, December.
    4. repec:zbw:bofism:2006_038 is not listed on IDEAS
    5. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
    6. Snellman, Heli, 2006. "Automated teller machine network market structure and cash usage," Scientific Monographs, Bank of Finland, number 2006_038.
    7. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    8. Norbäck, Pehr-Johan & Persson, Lars & Tå̊g, Joacim, 2014. "Acquisitions, entry, and innovation in oligopolistic network industries," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 1-12.
    9. Alexei Parakhonyak & Nick Vikander, 2019. "Optimal Sales Schemes for Network Goods," Management Science, INFORMS, vol. 65(2), pages 819-841, February.
    10. Yue Liu & Rong Luo, 2023. "Network Effects and Multinetwork Sellers’ Dynamic Pricing in the U.S. Smartphone Market," Management Science, INFORMS, vol. 69(6), pages 3297-3318, June.
    11. Michihiro, Kandori & Rob, Rafael, 1998. "Bandwagon Effects and Long Run Technology Choice," Games and Economic Behavior, Elsevier, vol. 22(1), pages 30-60, January.
    12. Tingting He & Dmitri Kuksov & Chakravarthi Narasimhan, 2012. "Intraconnectivity and Interconnectivity: When Value Creation May Reduce Profits," Marketing Science, INFORMS, vol. 31(4), pages 587-602, July.
    13. Klaus CONRAD, 2005. "Price Competition and Product Differentiation when Goods have Network Effects," Industrial Organization 0502002, University Library of Munich, Germany.
    14. Suleymanova Irina & Wey Christian, 2011. "Bertrand Competition in Markets with Network Effects and Switching Costs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-58, September.
    15. Ewald Scherm & Christian Maaß, 2006. "Zum Stellenwert der Netzwerkökonomik in der Strategie-/Marketingforschung —Eine Analyse empirischer Untersuchungen," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 17(1), pages 27-46, March.
    16. Snellman, Heli, 2006. "Automated teller machine network market structure and cash usage," Bank of Finland Scientific Monographs, Bank of Finland, volume 0, number sm2006_038.
    17. Netsanet Haile & Jörn Altmann, 2016. "Structural analysis of value creation in software service platforms," Electronic Markets, Springer;IIM University of St. Gallen, vol. 26(2), pages 129-142, May.
    18. Markovich, Sarit & Moenius, Johannes, 2009. "Winning while losing: Competition dynamics in the presence of indirect network effects," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 346-357, May.
    19. Hess, Mike & Ricart, Joan E., 2002. "Managing customer switching costs: A framework for competing in the networked environment," IESE Research Papers D/472, IESE Business School.
    20. Naskar, Mili & Pal, Rupayan, 2020. "Network externalities and process R&D: A Cournot–Bertrand comparison," Mathematical Social Sciences, Elsevier, vol. 103(C), pages 51-58.
    21. Robert J. Kauffman & James McAndrews & Yu-Ming Wang, 2000. "Opening the “Black Box” of Network Externalities in Network Adoption," Information Systems Research, INFORMS, vol. 11(1), pages 61-82, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:netnom:v:15:y:2014:i:1:p:1-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.