Bandwagon Effects in High Technology Industries

Bandwagon Effects in High Technology Industries

by Jeffrey H. Rohlfs, Hal Varian
     
 

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Economists use the term "bandwagon effect" to describe the benefit a consumer enjoys as a result of others' using the same product or service. The history of videocassettes offers a striking example of the power of bandwagon effects. Originally there were two technical standards for videocassettes in the United States: Beta and VHS. Beta was widely regarded to have

Overview

Economists use the term "bandwagon effect" to describe the benefit a consumer enjoys as a result of others' using the same product or service. The history of videocassettes offers a striking example of the power of bandwagon effects. Originally there were two technical standards for videocassettes in the United States: Beta and VHS. Beta was widely regarded to have better picture quality, but VHS could record longer television programs. Eventually the selection of Beta cassettes shrank to zero, leaving consumers no choice but to get on the VHS bandwagon. The most successful bandwagon, apart from telephone service, is the Internet.

In this book Jeffrey Rohlfs shows how the dynamics of bandwagons differ from those of conventional products and services. They are difficult to get started and often fail before getting under way. A classic example of a marketing failure is the Picturephone, introduced by the Bell System in the early 1970s. Rohlfs describes the fierce battles waged by competitors when new services are introduced, as well as cases of early agreement on a single technical standard, as with CDs and CD players. He also discusses the debate among economists and policy analysts over the advantages and disadvantages of having governments set technical standards. The case studies include fax machines, telephones, CD players, VCRs, personal computers, television, and the Internet.

Product Details

ISBN-13:
9780262182171
Publisher:
MIT Press
Publication date:
10/01/2001
Pages:
250
Product dimensions:
6.00(w) x 9.00(h) x 1.00(d)

What People are saying about this

Gerry Faulhaber

Witty, literate, and right on target, Rohlfs captures the economic and business principles of network ('bandwagon') effects in today's hottest sector of the economy. Network effects is the word du jour in the current business jargon, and many apply it where it doesn't work. Rohlfs is careful and convincing in laying out the theory, and absolutely on target in the many carefully researched examples he uses. The book is fun to read as well as incredibly useful in sorting out the wheat from the chaff. Rohlfs is the true pioneer of bandwagon/network effects, having discovered the concept almost thirty years ago. With this book, Rohlfs shows he is still the master, not only of the underlying theory but also of its practical application to a myriad of business situations. If you need one book to read on bandwagon/network effects, this has to be your choice.

Edward E. Zajac

This book is a gem; Rohlf's writing is straightforward and very readable.
The book is timely because its subject matter is at the heart of e-commerce.

Joseph Farrell

Jeffrey Rohlfs was a major early contributor to the theory of network effects, and here he combines sensible theory with thoughtful case studies. Everyone interested in innovation and competition will find value in this book.

Michael Katz

A witty and accessible introduction to bandwagon and network effects by one of the true pioneers in the field. The book surveys theory and practice to draw out practical lessons of interest to business and government decision makers alike.

From the Publisher
"This book is a gem; Rohlf's writing is straightforward and very readable. The book is timely because its subject matter is at the heart of e-commerce."—Edward E. Zajac, Department of Economics, University of Arizona

Meet the Author

Jeffrey H. Rohlfs is a Principal at Strategic Policy Research in
Bethesda, Maryland.

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