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Chapter 12 strategy in markets with demand-side increasing return
Reflection: some tales of big winners and big losers is common in high-tech markets, particularly in the fields of computers and telecommunication. These are often winner-takes-all markets that a single firm eventually dominates, even though initially several well-positioned rivals heavily contested them. Many industries experience a period of consolidation after emergent phrase of product life cycle. This pattern is much more pronounced in high-technology markets where an underlying product characteristic accentuates it:  the product’s benefits to each user increase along with the number of others. As a result, consumers or firms choosing among alternative products want to choose the one others are choosing. Buyer preferences in markets with this characteristic is not identical with those from more convenient products.  The products or services we are considering here in demand-side increasing return exhibit increasing returns to the size of user population: the more people who use them, the more valuable they are.  This phenomenon has several labels: demand-side increasing returns, demand-side economies of scale, network externalities, network effect or positive feedback economics.