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Firm value in emerging network industries

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  • Lorenz Schneider

    (EM - EMLyon Business School)

Abstract

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 shortcomings of traditionally used ones, and propose a more realistic one.

Suggested Citation

  • Lorenz Schneider, 2014. "Firm value in emerging network industries," Post-Print hal-02313133, HAL.
  • Handle: RePEc:hal:journl:hal-02313133
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    Cited by:

    1. Martin Užík & Roman Warias & Jozef Glova, 2022. "Management of Transfer Prices in Professional Football as a Function of Fan Numbers," Mathematics, MDPI, vol. 10(16), pages 1-13, August.
    2. Arne Petermann & Georg Schreyögg & Daniel Fürstenau, 2019. "Can hierarchy hold back the dynamics of self-reinforcing processes? A simulation study on path dependence in hierarchies," Business Research, Springer;German Academic Association for Business Research, vol. 12(2), pages 637-669, December.

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