TITLE:
Should a New Good Replace Existing Ones? A Network Approach
AUTHORS:
Tomohiko Konno
KEYWORDS:
Local Social Interaction, Network Effect, Network Heterogeneity, Scale-Free Networks, Games on Networks, Coordination Games
JOURNAL NAME:
Theoretical Economics Letters,
Vol.5 No.4,
August
27,
2015
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.