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Should a New Good Replace Existing Ones? A Network Approach
Institute of Advanced Study, Waseda University, Tokyo, Japan
- 1 Institute of Advanced Study, Waseda University, Tokyo, Japan
Theoretical Economics Letters·Volume 05 (2015)·Pages 584–589·Published 20 July 2015·DOI10.4236/tel.2015.54068
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Abstract
We study goods (or service) with network effect. Social network services are examples. An existing service has an advantage over new one because of the network effect. We study the condition that new goods (or service) replace the existing one, and show that the condition depends on the underlying network structures. For this purpose, we study a coordination game with network structure. If more than half of the players change their strategies, then new strategy beats the existing one in regular networks. On the other hand, if very small number of players with large degree changes their strategies, then the new strategy beats the existing one in scale-free networks.
KeywordsLocal Social InteractionNetwork EffectNetwork HeterogeneityScale-Free NetworksGames on NetworksCoordination Games
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