Instrumental to the success of this new literature was the discovery of a whole new class of market failures caused by increasing returns and network externalities
. The theoretical relevance of network effects for industrial structure, monopoly power, and economic efficiency first explored by Michael Katz and Carl Shapiro (1985, 1986) provided the foundations for the theory of increasing returns and lock-in later developed by W.
One can understand why Initiative Q's marketing strategy has caused it to be dismissed as a (https://davidgerard.co.uk/blockchain/2018/06/24/initiative-q-a-non-crypto-private-currency-marketed-by-pyramid-scheme/) "pyramid scheme." But like any payments system, it faces "(https://www.investopedia.com/terms/n/network-effect.asp) network externalities
The use of network externalities
can be explained by the notions of Chung et al.
How network externalities
can exacerbate intergroup inequality.
"Simulating the Evolution of Market Shares: The Effects of Customer Learning and Local Network Externalities
," Computational Economics 43(1): 53-70.
/ Network effects occur when an increase in the number of users of some good raises benefits for all users.
Higher take-up rate means more "internalization" of externalities/spill-overs under the argument that network externalities
are exhausted if everybody is connected.
It will also consider future growth by improving access to markets, stimulating trade, investment and boosting productivity and efficiency through associated network externalities
and agglomeration effects.
Therefore, in our model, the variable "environmental influences" comprises the variables "competitive pressures" and "network externalities
He details basic trends in the banking industry driven by technological or regulatory changes and the reasons for the existence of banks and their roles in the economy, then provides analysis of competition in the banking sector based on the tools of industrial organization, looking at pricing, product differentiation, frictions, network externalities
and two-sided markets, market structure, mergers, and deregulation.