The Economics of Networks: Introduction The Economics of Networks

1. Introduction2

Network industries play a crucial role in modern life. The modern economy would be very much diminished without the transportation, communications, information, and railroad networks. This essay will analyze the major economic features of networks. In the course of the analysis it will become clear that many important non-network industries share many essential economic features with network industries. These non-network industries are characterized by strong complementary relations. Thus, the lessons of networks can be applied to industries where vertical relations play a crucial role; conversely, the economic and legal learning developed in the analysis of vertically-related industries can be applied to network industries.

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