Question

What factors can help a firm establish network effects? (select all that apply)

A) Move Early Strategy
B) Backward Compatibility
C) Encourage the development of complementary goods
D) Subsidize Adoption

Answer 1

Factors that can help a firm establish network effects include a move early strategy, backward compatibility, encouraging the development of complementary goods, and subsidizing adoption.

Step-by-step explanation:

Establishing network effects can be beneficial for a firm's success. Several factors that can help a firm establish network effects include:

1. Move Early Strategy: By entering the market early, a firm can gain a competitive advantage by attracting users and creating a network effect.
2. Backward Compatibility: Ensuring compatibility with existing products or systems can incentivize users to adopt and use the firm's product, leading to network effects.
3. Encourage the development of complementary goods: Supporting the creation of products or services that complement the firm's own offering can strengthen network effects by increasing the overall value for users.
4. Subsidize Adoption: Offering subsidies or incentives to encourage the adoption of the firm's product can help to establish network effects.