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Case Study 2 - Research Paper Example

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Case Study 2

THESIS STATEMENT The study intends to evaluate the claim that network effects are associated with path dependence and lock-in. DISCUSSION Network effect or direct-benefit effect is considered to be a vital part of economics and business. It is a kind of effect which determines that for certain sorts of decisions, an individual would incur an explicit benefit when he/she aligns their behavior with the behavior of other individuals. In this context, it is determined that the value of a product is directly dependent on the number of users using it (Kemper 67-84). Path dependence can be stated as a substitute analytical process for economics which is acknowledged to be a radical change of the neo-classical standards. It is a process of economic allocation where the arrangement of allocating determinates such as technology, factor, endowment, preference and institution not only depend on certain fundamentals but also depend on a particular contingent event. Instead of converting into an identified determinant, the process has undergone a number of potential equilibrium and selects it on the basis of the specific history of the process. It is worth mentioning that a positive feedback from the agents also helps in increasing the impact related to specific early selections and further actions that are to be done accordingly (1Liebowitz and Margolis, “Path Dependence, Lock-In, and History”; Perkins 1-8). However, numerous questions have been raised by a number of critics in order to derive an understanding regarding the conditions based on which an allocation path depends. The answer to this question can be provided by focusing on two issues which include the structure of the explicit network that helps in identifying the interdependency of the agent’s choice. Secondly, the characteristics of the rapidly emerging technological changes are also viewed to have an impact on the features of the different potential equilibrium and the permanence of “lock-in” to a specific path of allocation. In this context, David’s (1985) view can also be highlighted wherein he stated that the homomorphism of path dependency mainly depends on technology, institutions, organizations and other vital aspects. David has specified three situations which might work unruffled to make procedures of technological modification path dependent including, the methodological interrelatedness of structure component, along with changing cost and increasing return of scale. It is measured that this result in forcing agents to coordinate their choices and also lend determination to the resultant distribution (David 332-337). In a similar way, it has been viewed that W. Brian Arthur mainly focused him attention towards a single aspect i.e. increasing return stating that the adoption of return is only realized at a given point of time but dynamically. This increasing return may either emerge from the supply side resulting from the learning effect which is either learned through doing or using a product, or in the demand side as a result of positive network. In other words, it also takes into concern all those externalities that raise the benefits of a product or technology that arise for each user from the increasing number of users of the similar product. However, it is worth mentioning that either scenario results in receiving positive feedbacks from the macro state of the system to the selections of individual ...Show more

Summary

Case Study 2 INTRODUCTION Bottom-line is considered to be determined by business net incomes, or Earnings Per Share (EPS). It is also stated to refer to certain activities that may result in an upsurge or a decline in the net earnings or the overall profit of an organization…
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