The Economics of Networks: Concluding Remarks The Economics of Networks

7. Concluding Remarks

In this paper, we have noted some of the interesting issues that arise in networks and vertically-related industries, especially in the presence of a fragmented ownership structure. As is evident, many open questions remain. One of the most important issues that remains largely unresolved is the joint determination of an equilibrium market structure (including the degree of vertical integration) together with the degree of compatibility across firms. The extent of standardization in markets with more than two participants and the structure of "standards" coalitions also remain open questions. Markets for adapters and add-ons have not been sufficiently analyzed. An analysis of market structure in multi-period dynamic games with network externalities is also unavailable. Further, issues of predation and foreclosure in networks have not been fully analyzed yet. On a more fundamental level, there is no good prediction yet of the "break points" that define the complementary components in a modular design structure. Even if these break points are known, little analysis has been done of competition in a multi-layered structure of vertically related components. Nevertheless, it is exactly this kind of modelling that is needed for an analysis and evaluation of the potential structures of the "information superhighway".

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