Producer decision-making in markets with network externalities

Markets with network externalities, by which more users make a product more valuable, such as mobile telephone and Internet service markets, have been growing rapidly. In such markets, the value of products is created through dynamic interaction among consumers and producers. This paper presents analyses of the mechanisms of their interaction in a market with network externalities, particularly addressing producers’ decision-making. A simple decision-making model is constructed and examined using multi-agent simulation, game theoretic analysis, and experiments using human subjects. Results show that incomplete information among consumers might encourage new product market growth. Additionally, we discuss producer strategies for a product introduction plan, comparing results with real world data.