Order the answer to: Review the example of a…
| Question | Review the example of a network shown in Figure 6-4. Assume that only one person can join the network each month, starting with Adam and proceeding clockwise. a. Construct a table showing the value to the joining person as well as the external value to others (i.e., the value to al others in the network) when an additional person joins. (Hint: The entries for Ed are $4 and $4.) Then calculate the total social value for each level of membership. Graph the relationship between the size of the network and the total social value. Explain why this shows increasing returns rather than diminishing returns. b. Assume that the cost of joining is 4.50. Draw a graph which shows how membership changes over time if six people are in the network to begin with. Draw another one which shows what happens if there are initially three people in the network. What is the point at which the equilibrium “tips” toward universal membership? c. Suppose you are tl1e sponsor of the network shown in Figure 6-4. What kind of pricing could you use to get the network started when there are only one or two members? |
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| Subject | business-economics |
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