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I T a nd Publ i c Pol i c y Oc t . 21, 2004 I nt r oduc t i on M ot i va t i ng Exa m pl e s : TCP/ I P & Be r ke l ey Uni x GSM The W e b The Br ows e r W a r s e t c . , e t c

  1. I T a nd Publ i c Pol i c y – Oc t . 21, 2004 I nt r oduc t i on M ot i va t i ng Exa m pl e s : TCP/ I P & Be r ke l ey Uni x GSM The W e b The Br ows e r W a r s e t c . , e t c . , e t c … St e phe n M . M a ur e r 1 2 Gol dm a n Sc hool of Publ i c Pol i c y I nt r oduc t i on I nt r oduc t i on Ol d Ec onom yExt e r na l i t i e s 1. Di r e c tNe t wor k Ext e r na l i t i e s Pol l ut i on ( Ne ga t i ve ) M S W or d Fl owe r Ga r de ns ( Pos i t i ve ) 2. I ndi r e c tNe t wor k Ext e r na l i t i e s Ne t wor k Ext e r na l i t i e s Ope r a t i ng Sys t em s & Gam es “ I Ca r e I f You Us e I t ” 3. Phys i c a lNe t wor k Ext e r na l i t i e s How Bi g Shoul d t he Ne t wor k Be ? I nt e r net & Tel e phone s La wyer s & W or dPe r f e c t . . . 3 4 e e Di r e c t Di r e c t c c i i Pr Pr W ’ ( p) Ol d Ec onom y Ol d Ec onom y W ( p) W ( p) Shi f t i ng Dem a nd D = w( p) S( p) S( p) Us e r s Us e r s 5 6 1

  2. Di r e c t e Di r e c t c i Pr W ( p, n 1 ) De m a nd Ne w Ec onom y “ ICa r e i f YouUs e I t ” W ( p, n 2 ) D = w( p, n) W ( p, n 3 ) M ul t i pl e De m a nd Cur ve s I m pl i c a t i ons f or Ef f i c i e ncy Us e r s 7 8 e Di r e c t Di r e c t c e i c Pr i Pr Com pe t i t i on M onopol y W ( p, n 1 ) W ( p, n 1 ) Not e s : •Se l f - Cons i s t e ncy •M ul t i pl e Equi l i br i a W ( p, n 2 ) W ( p, n 2 ) W ( p, n 3 ) W ( p, n 3 ) P = M C M C n 1 n 2 n 3 Us e r s n 2 n 1 Us e r s n 3 9 10 e e Di r e c t Di r e c t c c i i Pr Pr M onopol y M onopol y W ( p, n 1 ) W ( p, n 1 ) W ( p, n 2 ) W ( p, n 2 ) W ( p, n 3 ) W ( p, n 3 ) M C M C n 1 n 2 n 1 n 2 n 3 n 3 Us e r s Us e r s 11 12 2

  3. Di r e c t Di r e c t Ta c t i c s Ta c t i c s Com m i t m e nt St r a t e gi e s Us e r Ne t wor ks Se c ond Sour c e s Pe ne t r a t i on Pr i c i ng I nt e l , I BM PC Cons um e r s Expe c t a t i ons Re nounc i ng M onopol y Hype Ne t s c a pe Na vi ga t or Va por wa r e I nve s t m e nt s & Al l i a nc e s At t a c k Ads The PC Re put a t i on 13 14 Di r e c t Di r e c t Ti ppi ng Ti ppi ng Ne t wor k Ef f e c t s The Be s t Pr oduc t Doe s n’ t Al ways W i n! VHS vs . Be t a R& D Ef f e c t s Appr opr i a bi l i t y I ncr e a s e d Dem a nd 15 16 e Di r e c t Di r e c t c i Pr Ef f i c i e ncy Ef f i c i e ncy W ( p, n 1 ) St a t i c Ef f i c i e ncy The Ol d Ec onom y Ans we r W ( p, n 2 ) How Bi g Shoul d The Ne t wor k Be ? W hi c h I ns t i t ut i on Com e s Cl os e s t ? W ( p, n 3 ) M C Dynam i c Ef f i c i e ncy Loc k- I n vs . St r a ndi ng n 1 n 2 n 3 Us e r s 17 18 3

  4. e Di r e c t Di r e c t c i Pr Ef f i c i e ncy Ef f i c i e ncy W ( p, n 1 ) M onopol y v s .Com pe t i t i on Ne t wor k Ext er na l i t i e s W ( p, n 2 ) Pr i c e & DW L Va r i e t y W ( p, n 3 ) Ec onom i e s of Sca l e & Dupl i c a t e d R& D M C I s The Com pe t i t i ve Sol ut i on I de a l ? n 1 n 2 n 3 Us e r s 19 20 Di r e c t Di r e c t Ef f i c i e ncy Ef f i c i e ncy Ope n St a nda r ds St r a ndi ng vs . Loc k- I n “Look a nd Fe el ” Swi t c hi ng Cos t s Ex Ant e vs . Ex Pos t Ef f i c i e nc y Coor di na t i on Pr obl em s Π Ha Aggr e s s i ve Pr i c i ng How Bi g Doe s ve t o Be ? Ha ppy Ac c i de nt s Be t a vs . Lea de d Ga s ol i ne 21 22 I ndi r e c t I ndi r e c t Cons um e r s Ca r e About Suppl y of a Com pl e m e nt a r y Good Pl a t f or m s & Appl i c a t i ons M or e M or e M or e M or e Appl i c at i ons Pl at f or m s Cons um e r s Pl at f or m s Ope r a t i ng Sys t em s a nd Sof t wa r e Cons ol e s a nd Gam e s DVDs a nd M ovi e s 23 24 4

  5. I ndi r e c t Phys i c a l I nt e r ope r a bi l i t y Cl os e d St a nda r ds Na t ur a l M onopol i e s Exc l us i ve Li ce ns e s Hydr oe l e c t i c Dam s • Ga m e s M a r gi nal Cos t Ope n St a nda r ds Com pet i t i ons Re duc i ng The Pl a t f or m ’ s Powe r Conge s t i on Shoul d W e Pr ot e c t I nt e r f a c e s ? Ha ppy Ac c i de nt s 25 26 I T a nd Publ i c Pol i c y – Oc t . 21, 2004 Phys i c a l Phys i c a l Ne t wor ks I nt e r net , Te l e phones Com pet i t i on Conge s t i on Ope ni ng The Ne t wor k The La s t M i l e St e phe n M . M a ur e r 27 28 Gol dm a n Sc hool of Publ i c Pol i c y 5

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