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Technology Adoption in the Presence of Network Externalities: A Web-Based Classroom Game

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This paper describes a customizable classroom game used to demonstrate the effects of network externalities on the adoption of new technologies. The game is a web-based adaptation of Ruebeck et al.'s (2003) network externalities game. The web-based game is freely available and can be played in a networked lab setting or via the Internet. In this game, players choose one of a number of competing technologies whose utility depends on the number of others choosing the same technology. In subsequent variations, we introduce sequential choice, imperfect information, heterogeneity, lock-in, and switching costs.
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Electronic copy available at: http://ssrn.com/abstract=855524
Technology Adoption in the Presence of Network
Externalities: A Web-Based Classroom Game
JAMES R. WOLF*
School of Information Technology
Illinois State University
jrwolf@ilstu.edu
THOMAS E. PORTEGYS
School of Information Technology
Illinois State University
portegys@ilstu.edu
This Draft
June 4, 2007
*Corresponding author.
Contact information
By mail:
Illinois State University
School of Information Technology
Campus Box 5150
Normal, IL 61790-5150
Phone: 309-438-5216
Fax: 309-438-5113
E-Mail: jrwolf@ilstu.edu
Electronic copy available at: http://ssrn.com/abstract=855524
Abstract
This paper describes a customizable classroom game used to demonstrate the
effects of network externalities on the adoption of new technologies. The game is a web-
based adaptation of Ruebeck et al.'s (2003) network externalities game. The web-based
game is freely available and can be played in a networked lab setting or via the Internet.
In this game, players choose one of a number of competing technologies whose utility
depends on the number of others choosing the same technology. In subsequent variations,
we introduce sequential choice, imperfect information, heterogeneity, “lock-in”, and
switching costs.
Introduction
Extant literature suggests that network externalities can result in the dominance of
one technology even if it is inferior to an alternate technology. As Ruebeck, Stafford,
Tynan, Alpert, Ball, and Butkevich (2003) note, network externalities exist when the
value of a product or service to a consumer depends on the number of other people using
a compatible product or service. Katz and Shapiro (1985) noted that these externalities
may be direct or indirect. Direct network effects are benefits generated through a direct
physical effect of the number of users on the value of a product or service. For example,
MSN Messenger users can only send instant messages to others using MSN Messenger
software. As a result, each additional MSN Messenger user directly and positively affects
the value of the product. With indirect network effects, consumption benefits do not
depend directly on the number of users but are "market mediated." For example, as more
users adopt the Linux computer operating system more software developers will start to
produce Linux versions of their products.
The goal of this paper is to describe a customizable web-based classroom game
used to demonstrate the effects of network externalities on the adoption of new
technologies. The game is a web-based adaptation of Ruebeck et al.'s (2003) network
externalities game. In our web-based adaptation, players choose one of a number of
competing technologies whose utility depends on the number of others choosing the same
technology. In subsequent variations, we introduce sequential choice, imperfect
information, heterogeneity, “lock-in”, and switching costs. The game is freely available
and can be played in a networked lab setting or via the Internet. In addition to the game,
a series of simple “warm-up” exercises are included (Appendix A).
We conclude the paper with ideas for the classroom discussion that follows the
game. Our discussions center on technology adoption and touch on ways that firms (e.g.,
eBay) can benefit from network externalities and how it is possible for an inferior
technology (e.g., VHS) to be adopted over a superior technology (e.g., Betamax).
Subsequently, we discuss the impact that switching costs, “lock in” and imperfect
information can have on technology adoption in the presence of network externalities.
The lecture concludes with a discussion of game 5. In game 5, it can be shown that
students prefer a “universal technology” (i.e., one that benefits from both direct and
indirect externalities) over a “proprietary technology” (i.e., one with only direct
externalities).
Obtaining and Installing the Software
The Game Master application, which can be downloaded from:
www.itk.ilstu.edu/faculty/portegys/programs/UtilityGame/GameMaster.jar, requires a
recent version of Java, e.g. 1.4 or higher, available at java.sun.com.
The jar file contains all the source code, associated files, build command, HTML files,
and the Master executable code. The Game Master can be started on most Windows
systems by simply double-clicking the jar file; otherwise, entering the following
command from the command line will also start it:
java –jar GameMaster.jar
The source files, which are compressed, are unpacked from the jar file with the
jar tool that comes with Java, or with an archiving tool such as WinRAR, available at
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www.rarlab.com. The system is then built by executing the buildgame.bat file, and tested
with the rungame.bat file.
The Game Player is a signed Java applet that will run in most browsers including
Internet Explorer, Firefox and Mozzila. The Game Player is available at:
www.itk.ilstu.edu/faculty/portegys/programs/UtilityGame/gameplayer.html
To install the Player applet on a specific web server, copy the gameplayer.html
(included in the jar file), and GamePlayer.jar files to that server. The MasterHost
parameter in gameplayer.html can be set to the IP address of the Master host, which will
allow players to connect to it. The Player applet communicates with the Master via Java
RMI (Remote Method Invocation) necessitating the signing of the applet with the
jarsigner command, which is invoked from the buildgame.bat script. The jarsigner
command expects to find a public/private key pair on the computer where the game is
installed having the alias “ugame”. This can be created with the keytool command as
follows:
keytool -genkey -alias ugame -keypass your_password
Upon connecting to the Master, you may be prompted to unblock a network
connection to allow RMI to proceed.
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Figure 1 – Game Master Application.
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Figure 2 – The Game Player Applet.
Figure 1 shows the Master application after initialization. Figure 2 shows the
Player applet after initialization.
Software Overview
This paper provides step-by-step instructions for running five variations of a game
that demonstrates network externality’s affect on consumer utility, herding behavior, and
standardization. In addition, this paper will demonstrate several ways that the game can
be customized to address additional topics related to network externalities. As this game
is based closely on Ruebeck et al.'s (2003) network externalities game, we will start by
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replicating their four games. Participants must decide which of the available technologies
to adopt in each game. The utility the participants receive depends on the technology
they choose as well as the number of other participants that also choose that same
technology. Each game has slightly different rules, as explained below.
In each of these games, players’ utilities are determined by the player’s choices
and the choices of the other participants according to the utility schedule entered into the
Game Master. Before starting the game session, the facilitator enters the values. A
represents the participant’s utility from choosing a product or technology and X
represents the utility derived from participants choosing the same (S) product or
technology. Ruebeck et al. (2003) use different notations but suggest setting a/x
somewhere between n/2 and n, where n is the number of participants each round.
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Figure 3. The Game Master Application.
Figure 3 shows a setup that includes a choice of two different technologies and a utility
function of both technologies of μ = 5+1*S, where S is the number of participants that
choose the same product or technology. While not used in this example, Y represents the
utility derived from participants choosing a different (D) product or technology.
Throughout this paper, we will examine positive externalities (i.e., X and Y are positive),
however, the game has been constructed to allow for negative externalities (i.e., X and Y
can be set to negative numbers).
In these games, the symbols act as proxies of the technology or product choices
for example, different instant messaging packages (e.g., MSN Messenger, Yahoo!
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Messenger or AOL Instant Messenger (AIM)) or different social networking sites (e.g.,
Facebook, MySpace or Zanga). Individual participants do not see the same symbol
choices and the order of the symbols are randomized.
Game One – Simultaneous Choice
In the first game, participants choose one of a number symbols and their one time
choice determines their utility for 10 rounds. Ruebeck et al. (2003) gave their participants
a choice between two symbols but our software allows for up to six options. Adding or
subtracting the number of options is accomplished by selecting or deselecting the
checkbox next to a symbol on the Game Master. In addition, while we use 10 rounds for
this game, others may choose to use a different number of rounds.
Prior to beginning the game, the facilitator should set the desired utilities and the
number of choice options. Participants should be informed that their utility for each round
is determined by the number of people who have chosen the same technology and their
choice of symbol determines their utility for the entire game (e.g., 10 rounds).
Participants choose by selecting the check box next to the desired symbol and then
selecting the Submit Choice checkbox.
The facilitator begins the game by selecting the Start/Stop Game checkbox and
then selects the Start/Stop Round checkbox. After all participants make their choices, the
facilitator selects the Start/Stop Round checkbox ending the round. To move to the 10th
round, the facilitator enters the number 10 into the Round # textbox and starts and then
stops the round. The software then calculates each player’s utility for rounds two to 10.
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Finally, the facilitator selects the Start/Stop Round checkbox ending the game. Each
participant is shown their total utility for the game as well as round-by-round summaries.
Figure 4 – Player During Round 2 of Game 1.
Game Two – Sequential Choice
In this game, participants decide in each period whether to choose a symbol or no
symbol. However, once a symbol is chosen, participants cannot change their choices.
Prior to beginning the game, the facilitator sets the desired utilities and the number of
choice options. Participants may elect not to make a choice in any round but they will
receive a utility of zero for that round. After they select a symbol, their choice of symbol
will determine their utility not only for that round, but also for all remaining rounds. As
in game one, each participant’s utility for each round is determined by the number of
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people who have chosen the same technology. Again, participants choose by selecting
the check box next to the desired symbol and then select the Submit Choice checkbox.
The facilitator begins the game by selecting the Start/Stop Game checkbox and
then selects the Start/Stop Round checkbox. After each participant has had enough time
to make their choice, the facilitator selects the Start/Stop Round checkbox ending the
round. When a sufficient number of players make their choices, or a certain amount of
time has passed (a timer is available as a convenience), the facilitator selects the
Start/Stop Round checkbox ending the round.
Figure 5 – Game Master During Game.
The number of players choosing the various items becomes visible in the S box
for each item. Prior to ending the round, the facilitator may want to inform the
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participants that the round will be ending soon and they are not required to make a
choice, but will receive a utility of zero for that round if they fail to make a choice. The
facilitator can relay this information verbally or use the software’s Notify players feature.
To use this feature, the facilitator simply types a message into the text box and selects the
Notify players push button. The message is broadcast to all players and appears at the
bottom of their screens.
To start the next round, the facilitator selects the Start/Stop Round checkbox. At
the beginning of the next round, the player can observe the S values for each item as well
as his accumulated utility. Each participant’s accumulated total as well as a tabular
history of the game is displayed.
Again, after an appropriate amount of time the facilitator ends the round by
selecting the Start/Stop Round checkbox. This continues for as many rounds as it takes
until all participants have selected a symbol. At this point, the facilitator ends the game
by entering the number 10 into the Round # textbox and then starting and stopping the
round. The software then calculates each player’s utility for the remaining rounds.
Finally, the facilitator selects the Start/Stop Round checkbox to end the game. Each
participant is shown their total utility for the game as well as round-by-round summaries.
Game Three – Sequential Choice with Noisy Signals
This game only differs from game two in the information participants receive in
each round about the number of people who have chosen each technology. In game two,
participants are shown a summary of all participant choices after each round; in game
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three, participants are shown a “noisy” summary of all participant choices after each
round.
The facilitator can introduce noise into the S values visible to the game
participants by setting the noise slide bar. The default noise level is 0%, but can be set at
any level from 0% up to 100%. The noise level represents the independent likelihood
that a choice is displayed in S. For example, if the facilitator sets this value to 50% and
the actual S value of a technology is 10, the resulting S values that each participant sees
can be compared to 10 true coin tosses with the number of heads produced by the 10
tosses being the visible S value. If the noise level is set to 100%, all players will see S
equal to 0% and thus have no idea of what items have been chosen (other than their own
choice). The level of noise is set by the Game Master Application and this setting
determines the likelihood if each choice is displayed. However, whether or not the choice
is displayed is determined by each participant’s Player Applet. As a result, it is likely that
different participants see different results.
Again, each player’s utility for the round is based on the known number of people
choosing the same technology, i.e., the number that is revealed. This continues for as
many rounds as it takes until all participants have selected a symbol. At this point, the
facilitator ends the game by entering the number 10 into the Round # textbox and then
starting and stopping the round. The software then calculates each player’s utility for the
remaining rounds. Finally, the facilitator selects the Start/Stop Round checkbox ending
the game. At this point, each participant is shown their total utility for the game as well as
actual round-by-round summaries.
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Game Four – Sequential Choice with Switching Costs
This game differs from game two in the following way. After the third round, one
of the symbols will be randomly selected to provide a higher utility than the other.
Ruebeck et al. (2003) recommend flipping a coin to choose the technology to change.
Ruebeck and associates also propose that for smaller classes that it might be helpful to
select the smaller of the networks. If a participant has chosen a symbol after the change in
the selected technology’s utility, they can change to another symbol but must pay to
make the change. The cost for switching to another symbol is set by entering the amount
in the Choice release fee textbox. Ruebeck et al. (2003) recommend increasing the utility
of the selected technology by a/4 and setting the switching costs to a.
Game Five – Sequential Choice with a Universal Technology
Game five differs from game two in that one of the technology choices will have
a utility function in which participants’ utility for choosing that technology will be
affected by two factors: the number of people who have chosen the same technology and
the number of people that have chosen a different technology. Y represents the utility
derived from participants choosing a different (D) technology. The default Y parameter is
NA (not available), which means that the Y and D values are not visible to the game
participants. Setting Y to a numeric value results in the screen views shown in Figures 5
and 6.
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Figure 6 – Game Master Application Game 5.
Figure 6 shows a game setup that includes a choice between two different
technologies. The first technology has a utility function of μ = 5 + 0.5*S + 0.5*D, where
S is the number of participants that choose the same technology and D is the number of
participants choosing a different technology
Discussion
We have successfully run these games in several classes. Due to scheduling and
space limitations, we typically run the games in groups of ten to fifteen and then discuss
the results and implications in a large lecture session on a subsequent day. All five games
can be completed in a single fifty-minute session.
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Just as our network externality game borrows heavily from Ruebeck et al.'s
(2003) network externalities game, our approach to the classroom discussion that follows
the game also is based on their approach. We start by giving students a definition of
network externalities and then discuss technologies (e.g., instant messaging software,
telephone networks), firms (e.g., eBay and Microsoft), and markets (e.g., the Chicago
Mercantile Exchange) affected by network externalities. We then explain that
externalities may be either positive (e.g., fax machines) or negative (e.g., pollution), and
ask students to give examples of technologies or markets with externalities.
We begin our discussion of the games by showing a graph depicting average
utilities from game one and game two. We ask students to explain the differences in the
utilities obtained in each game. We then ask students who delayed making a selection
(i.e., made their selection in rounds two or higher) in game two to explain their strategy;
why did they wait? And what prompted them to finally make a choice? At this point, like
Ruebeck et al. (2003), we explain that markets with network externalities generally are
very "tippy" (i.e., as soon as one network is noticeably larger than the other, the rest of
the market joins the larger network) and point out that information, not timing, is what is
really important.
Next, we ask students to describe the consequences of choosing early (in round
one of game two) and correctly, and the consequences of choosing early and incorrectly.
We conclude the discussion of games one and two by talking about “bleeding edge”
technologies and why consumers often wait before adopting the latest technology. We
introduce one or more new technologies with competing standards (e.g., Blu-ray and HD
DVD) and ask students which of the standards they would be willing to purchase. In a
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recent post-game class discussion, students suggested that they are waiting to purchase
either Blu-ray or HD DVD players until after the market has determined a winner.
Next, to discuss game three, we show a graphic comparing the utilities that
students obtained for games two and three and describe how imperfect (e.g., slow or
noisy) information can fool people into selecting the wrong technology. We then discuss
the information sources that the students use to make technology adoption decisions (e.g.,
friends, family, or web sites) and why this information often is incomplete or inaccurate.
Next, to discuss game four, we note the effects of switching costs on technology
choices and how such switching can prevent consumers from switching to a superior
technology. Our students are very familiar with switching costs; nearly all of them have
mobile phone contracts with hefty “termination fees.” In fact, when questioned, most of
our students state that they would switch carriers, mobile phones, or both if they could
avoid the termination fees.
Finally, when covering game five, we discuss how an open standard or “universal
technology” (i.e., one that benefits from both direct and indirect externalities) can
overcome the externalities of a “proprietary technology” (i.e., one with only direct
externalities). We discuss examples from mobile phone industry and instant messaging
software. For example, wireless provider Alltel's “My Circle” plan allows customers to
make free calls to ten phone numbers on any network (mobile or landline), anywhere in
America, anytime of the day. In another example, Google has opened up its instant
messaging software, Google Talk, allowing it to connect with other leading instant
messaging software packages (e.g., AIM, MSN or Yahoo).
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In closing, like Wolf and Myerscough (2007), we have found that providing a
small payment or reward (e.g., key chains, mugs or pens) to the participants with the
highest scores encourages students to take classroom game seriously. In addition, we
have also found that the desire to perform better than their classmates or “bragging
rights” is also a powerful motivator.
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References
Katz, M. L., & Shapiro, C. (1985). Network Externalities, Competition, and
Compatibility. American Economic Review, 75, 424-440.
Ruebeck, C.S., Stafford, N., Tynan, W., Alpert, G., Ball, & Butkevich, B. (2003).
Network Externalities and Standardization: A Classroom Demonstration. Southern
Economic Journal, 69, 1000-08.
Wolf, James R. and Myerscough, Mark A. (2007). Reputations in Markets with
Asymmetric Information: A Classroom Game. Journal of Economic Education,
Forthcoming.
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Appendix A - Network Externalities Pre-Exercise Warm-Up Problems:
For this exercise, players choose between various shapes (e.g., CIRCLES, SQUARES, or
STARS), which represent different technologies. Each player’s objective is to maximize
their individual utility. To calculate each player’s utility, use the following formula:
(1) Utility = a + (x * s)
Where a = player’s initial value of the technology. The total number of people using the
technology, i.e. the size of the network, is s and x is the network externality multiplier.
Total benefit for the network is the product of x times s. Below is a screen shot of the
player’s view prior to the start of the exercise.
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For Game 1
(Question 1) For questions 1.1.a-1.1.f, a = 5 and x = 0.5. The total number of people
using the technology, i.e. the size of the network, is s.
In round 1 player A and six others (for a total of 7) selected SQUARE and player B and
five other (for a total of 6) selected CIRCLE and player C and nine others (for a total of
10) selected STAR.
a. What is the utility for player A for round 1? ___________
b. What is the utility for player B for round 1? ___________
c. What is the utility for player C for round 1? ___________
In this game, there are 10 rounds. If each player’s utility is the same for each remaining
round:
d. What is the aggregated utility for player A for rounds 1-10? ___________
e. What is the aggregated utility for player B for rounds 1-10? ___________
f. What is the aggregated utility for player C for rounds 1-10? ___________
(Question 2) For questions 1.2.a-1.2.f, a = 2 and x = 1. The total number of people
using the technology, i.e. the size of the network, is s.
In round 1 player A and one other player (for a total of 2) selected SQUARE and player
B alone selected CIRCLE and player C and nineteen others (for a total of 20) select
STAR.
a. What is the utility for player A for round 1? ___________
b. What is the utility for player B for round 1? ___________
c. What is the utility for player C for round 1? ___________
In this game, there are 10 rounds. If each player’s utility is the same for each remaining
round:
d. What is the aggregated utility for player A for rounds 1-10? ___________
e. What is the aggregated utility for player B for rounds 1-10? ___________
f. What is the aggregated utility for player C for rounds 1-10? ___________
For Game 2
(Question 1) For questions 2.1.a - 2.1.h, a = 5 and x = 0.5. The total number of
people using the technology, i.e. the size of the network, is s. For this game, once a
player has selected a technology (shape), they will keep that technology for all
remaining rounds
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In round 1 player A and four others (for a total of 5) selected SQUARE and player B and
two others (for a total of 3) selected STAR.
a. What is the utility for player A for round 1? ___________
b. What is the utility for player B for round 1? ___________
c. Player C elected not to select a technology in round. If Player C elects to select a
technology in round 2, which technology will player C select? ___________
If, in round 2, player C and all other remaining players (for a total of 15) select
SQUARE,
d. What is the utility for player A for round 2? ___________
e. What is the utility for player B for round 2? ___________
In this game, there are 10 rounds. If each player’s utility is the same for each remaining
round:
f. What is the aggregated utility for player A for rounds 1-10? ___________
g. What is the aggregated utility for player B for rounds 1-10? ___________
h. What is the aggregated utility for player C for rounds 1-10? ___________
(Question 2) For questions 2.2.a - 2.2.j, a = 2 and x = 1. The total number of people
using the technology, i.e. the size of the network, is s. For this game, once a player
has selected a technology (shape), they will keep that technology for all remaining
rounds
In round 1 player A and four others (for a total of 5) selected SQUARE and player B and
two others (for a total of 3) selected STAR.
a. What is the utility for player A for round 1? ___________
b. What is the utility for player B for round 1? ___________
If, in round 2, five of the remaining players select SQUARE,
c. What is the utility for player A for round 2? ___________
d. What is the utility for player B for round 2? ___________
If, in round 3, player C and all other remaining players (for a total of 15) select
SQUARE,
e. What is the utility for player A for round 3? ___________
f. What is the utility for player B for round 3? ___________
g. What is the utility for player C for round 3? ___________
In this game, there are 10 rounds. If each player’s utility is the same for each remaining
round:
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h. What is the aggregated utility for player A for rounds 1-10? ___________
i. What is the aggregated utility for player B for rounds 1-10? ___________
j. What is the aggregated utility for player C for rounds 1-10? ___________
For Game 3
This game only differs from game two in the information participants receive in each
round about the number of people who have chosen each technology. In games one and
two, participants were shown a summary of all participant choices after each round; in
game three, participants are shown a “noisy” summary of all participant choices after
each round. In this setting, the game will only display a fraction of the participant choice
information.
For this question, the noise value is set to 50%. This means that each player has a 50%
chance of seeing another participant's choice after the round.
For example, if 10 other players choose SQUARE, the S value that each player would see
can be compared to 10 true coin tosses with the number of heads produced by the 10
tosses being the visible S value. So, if three of the 10 “coin tosses” come up heads, the
player would see a 3 next to SQUARE and if eight of the 10 coin tosses” come up heads,
the player would see an 8 next to SQUARE.
(Question 1) For questions 3.1.a-3.1.d, a = 5 and x = 0.5. The total number of people
using the technology, i.e. the size of the network, is s.
In round 1, player A decided not to select a technology. In round 2, player A sees a
“noisy signal” of 2 for SQUARE and 2 for STAR and selects SQUARE. In addition to
player A, two other players also selected SQUARE in round 2.
Like player A, in round 1, player B decided not to select a technology. In round 2, player
B sees a “noisy signal” of 1 for SQUARE and 6 for STAR and selects STAR. In addition
to player B, two other players also selected STAR in round 2.
If the actual numbers from round 1 were 3 SQUARE and 9 STAR.
a. What is the utility for player A for round 2? ___________
b. What is the utility for player B for round 2? ___________
In this game, there are 10 rounds. If each player’s utility is the same for each remaining
round:
c. What is the aggregated utility for player A for rounds 1-10? ___________
d. What is the aggregated utility for player B for rounds 1-10? ___________
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For Game 4
For this game, we introduce switching costs. Players have the opportunity to switch
technologies, but must pay a switching cost.
(Question 1) For questions 4.1.a - 4.1.l, a = 5 and x = 0.5. The total number of people
using the technology, i.e. the size of the network, is s. The cost to switch technologies
is 50.
In round 1 player A and four others (for a total of 5) selected SQUARE and player B and
two others (for a total of 3) selected STAR.
a. What is the utility for player A for round 1? ___________
b. What is the utility for player B for round 1? ___________
If, in round 2, player C and all other remaining players (for a total of 15) select
SQUARE,
d. What is the utility for player A for round 2? ___________
e. What is the utility for player B for round 2? ___________
In round 3, player B, and the other two STAR users, pay the switching costs and select
SQUARE,
f. What is the utility for player A for round 3? ___________
g. What is the utility for player B for round 3? ___________
In this game, there are 10 rounds. If each player’s utility is the same for each remaining
round:
h. What is the aggregated utility for player A for rounds 1-10? ___________
i. What is the aggregated utility for player B for rounds 1-10? ___________
j. What is the aggregated utility for player C for rounds 1-10? ___________
k. If switching costs were raised to 65, would player B still be willing to make the
switch? __________
l. If switching costs were raised to 75, would player B still be willing to make the switch?
__________
m. If in round three, STAR’s technology was upgraded and the new parameters for STAR
are now a = 7 and x = 0.5 (SQUARE’s parameters remain unchanged and the cost to
switch technologies is still 50), would player B still switch?
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For Game 5
For this game, we introduce indirect network effects.
To calculate each player’s utility, use the following formula:
(2) Utility = a + (x * s) + (y * d)
Where a = player’s initial value of the technology. The total number of people using the
technology, i.e. the size of the network, is s and x is the direct network externality
multiplier. The total number of people using the other related technologies is d and y is
the in-direct network externality multiplier.
Total direct benefit from the network is the product of x times s. Total in-direct benefit
from the network is the product of y times d.
(Question 1) For questions 5.1.a - 5.1.l, a = 5, x = 0.5 and y = 0.4. The total number of
people using the technology, i.e. the size of the network, is s. The cost to switch
technologies is 20.
In round 1 player A and four others (for a total of 5) selected SQUARE and player B and
two others (for a total of 3) selected STAR.
a. What is the utility for player A for round 1? ___________
b. What is the utility for player B for round 1? ___________
If, in round 2, player C and all other remaining players (for a total of 15) select
SQUARE,
d. What is the utility for player A for round 2? ___________
e. What is the utility for player B for round 2? ___________
In round 3, player B, and the other two STAR users, are considering switching to
SQUARE,
f. If there are 8 more rounds (for a total of 10 rounds) in the game, should player B switch
to SQUARE?
24
... The goal of this special issue is to provide a forum for the exchange of ideas concerning the use of games in teaching MS/OR. In particular, papers presented in this issue fall into one of three categories: i) new educational games that have been developed (Drake and Mawhinney, 2007, Hans and Nieberg, 2007, Villalobos, 2007, Wolf and Poretgys, 2007), ii) novel implementation of and experience with existing games (Olsen, 2007), and iii) assessment of the effectiveness of the use of games (Ben-Zvi and Carton, 2007). There are also examples of games that can be run in much less than a lecture to some that may be run over several class periods. ...
... The class size was roughly 60 students per class with 28 participants in total. With such a large class size it is typically not feasible to conduct assignments that require all students to be online at the same time interacting in real-time ( Schmidt, 2003;Wolf and Portegys, 2007) 4 or even working on the simulation while in a classroom setting ( Sayama, 2006). The benefit of implementing the simulation in NetLogo is that files can be saved as java applets and run in a web browser at the students' convenience, requiring no software downloads or complicated installations. ...
Article
Full-text available
This paper is based on a simulation model, programmed in NetLogo, that demonstrates changes in market structure that occur as marginal costs, demand, and barriers to entry change. Students predict and observe market structure changes in terms of number of firms, market concentration, market price and quantity, and average marginal costs, profits, and markups across the market as firms innovate. By adjusting the demand growth and barriers to entry, students can explore market changes in terms of the output variables mentioned above. The exercise allows students to synthesise information from several different chapters of the text that discuss differing market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. Finally, the exercise exposes students to computational methods, simulation, and a dynamic perspective on the static models provided by the course text.
... The class size was roughly 60 students per class with 28 participants in total. With such a large class size it is typically not feasible to conduct assignments that require all students to be online at the same time interacting in real-time (Schmidt, 2003;Wolf and Portegys, 2007) 4 or even working on the simulation while in a classroom setting (Sayama, 2006). The benefit of implementing the simulation in NetLogo is that files can be saved as java applets and run in a web browser at the students' convenience, requiring no software downloads or complicated installations. ...
Article
Full-text available
This article examines the pedagogical benefits of using multimedia in the teaching of economics at an undergraduate level, then provides an example from my own teaching to serve as a reference for lecturers interested in creating an interactive learning environment, which prompts genuine two-way discussion in the classroom and produces better learning outcomes for students. The final section ties in the use of multimedia with broader debates among economists about the appropriate level of government intervention in the economy. The paper concludes by arguing that the use of multimedia has strong pedagogical advantages in stimulating greater student engagement and helping to rectify the image of economics in the wider community. Lecturers interested in using multimedia in their teaching will find an extensive list of web resources at the end of this paper.
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A model of interactive information technology (IT) usage that integrates network externalities with traditional usage motivations is proposed and is validated by a survey of instant messaging (IM) usage by university students in Taiwan. Network benefit, found to be a significant usage motivation, arises from direct and indirect sources, conceptualized as referent network size and perceived complementarity, respectively. Network benefit has a direct effect on user intention to use interactive IT and an indirect effect mediated by perceived enjoyment, and in turn it is affected by perceived complementarity. IT vendors can enhance product value by investing in value-added complementary products and services. Implications for IT usage theories and managerial practice are discussed.
Article
Full-text available
There are many products for which the utility that a user derives from consumption of the good increases with the number of other agents consuming the good. There are several possible sources of these positive con- sumption externalities.1 1) The consumption externalities may be generated through a direct physical effect of the number of purchasers on the quality of the product. The utility that a consumer derives from purchasing a telephone, for ex- ample, clearly depends on the number of other households or businesses that have joined the telephone network. These network externalities are present for other communi- cations technologies as well, including Telex, data networks, and over-the-phone facsimilie equipment. 2) There may be indirect effects that give rise to consumption externalities. For example, an agent purchasing a personal computer will be concerned with the number of other agents purchasing similar hardware because the amount and variety of software that will be supplied for use with a given computer will be an increasing function of the number of hardware units that have been sold. This hardware-software paradigm also applies to video games, video players and recorders, and phonograph equipment. 3) Positive consumption externalities arise for a durable good when the quality and availability of postpurchase service for the good depend on the experience and size of the service network, which may in turn vary with the number of units of the good that have been sold. In the automobile market, for example, foreign manufacturers' sales initially were retarded by consumers' awareness of the less experienced and thinner service networks that existed for new or less popular brands. In all of these cases, the utility that a given user derives from the good depends upon the number of other users who are in the same "network" as is he or she. The scope of the network that gives rise to the consumption
Article
The authors describe a classroom game used to teach students about the impact of reputations in markets with asymmetric information. The game is an extension of Holt and Sherman’s lemons market game and simulates a market under three information conditions. In the full information setting, all participants know both the quality and the price of the items for sale. In the second setting, sellers have better quality information than buyers. In the third setting, sellers maintain their information advantage, but buyers may post feedback on the sellers’ performance. The posted feedback generally increases buyer trust and disciplines sellers, resulting in higher levels of trade and higher average product quality. The game can be completed in one class period and includes discussion questions.
Reputations in Markets with
  • James R Wolf
  • Mark A Myerscough
Wolf, James R. and Myerscough, Mark A. (2007). Reputations in Markets with