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1. Please read the article “Metcalfe’s Law and Network Effects” by H. Mendelson and answer the following questions: 1) What are Metcalfe’s law and network effects? 2) Provide one example for both direct network effects and for indirect network effects, respectively.
1) Metcalfe’s Law: The value of the network is equal to the square of the number of nodes in the network, and the value of the network is proportional to the square of the number of users. It implies a phenomenon that as more users to use Internet, the value of the network increased. And this attract more users, further increasing the value.
Network effects: The value of a product, service or technology to a user is an increasing function of the number of other users who use the same product, service or technology.
2) Direct network effect means there is a direct increasing relationship between network size and the value of network to given a user. Example: When mobile phone first launched, people just used it to make calls and send texts. However, with more and more user, the demand for function of mobile phone increased. People also want to play and work through mobile phones. Then, manufacturers developed many other functions, Thus the value of mobile phone to a user increased and attract even more user.
Indirect network effect example: When more people use the Microsoft Windows opening system, more developers choose to develop application for Microsoft Windows opening system. This makes the value of this opening system increase. And thus, attract more users.
2. Please answer the questions for Priceline article.…...

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