Week 5: Compete with Network effect

1. Achieving critical mass-

-  Installed base,

- Network effects and

- Price at which diffusion becomes "self-sustaining" (means that we can maintain the MKT without technology improvement)

2. critical mass diffusion is self-perpetuating, and marks the switch between a high-adoption and a low-adoption equilibrium.

---

Strategies for Network effect product

1. Compatibility

2. strategic pricing -Penetration Pricing

For network effect product, we can set a low price to accelerate the diffusion process to gain the a installed base. After that, with the increased network effect, people's WTP will increase. Then, we can choose to stay low price or switch to higher price.

strategic pricing- Skimming price:

早期的使用者，一般具有比较高的WTP，故一开始定高价，然后逐渐降价，去收割其他WTP比较低的用户。 （电影）