Document Type

Article

Publication Date

11-11-2020

Abstract

This Chapter begins by examining and exploring the theoretical and empirical limits of the possible bases of network effects, paying particular attention to the most commonly cited framework known as Metcalfe’s Law. It continues by exploring the concept of network externalities, defined as the positive external consumption benefits that the decision to join a network creates for the other members of the network, which is more ambiguous than commonly realized. It then reviews the structural factors needed for models based on network effects to have anticompetitive effects and identifies other factors that can dissipate those effects. Finally, it identifies alternative institutional forms that can eliminate or mitigate the impact of network effects.

Keywords

Antitrust law & poicy, economics of networks, externalities, Metcalfe's Law, competition, market failures, consumer welfare

Publication Citation

The Global Antitrust Institute Report on the Digital Economy 5

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