Provide historical background on when each of the concepts of ânetwork effects,â ânetwork goods,â âsupermodularity,â and âsupermodular goodsâ first appeared and became popular.
summary
nishio The network effect was first introduced in 1908 (telephone), Metcalfeâs law in the 1980s (Ethernet), and then in 1985~95 the term ânetwork goodsâ was coined in economic theorizing. The concept of Supermodular Goods was first introduced in 1978, and Supermodular Goods was first published in 1990s, 2004 (open source movement).
- [[network effect]] ďź[[Network Effect]]ďź
- Period of appearance: 1970s to 1980s
- BACKGROUND: A phenomenon that shows that the value of a telephone network increases in proportion to the number of users. Modern theory was developed in the 1990s by Joseph Farrell and Carl Shapiro (Wikipedia) (Corporate Finance Institute ).
- [Network effect - Wikipedia](https://en.wikipedia.org/wiki/Network_effect)
- > Network effects were a central theme in the discussions of Theodore Vail, the first president of Bell Telephone after it was patented, in his monopoly of telephone service in the U.S. In 1908, when he presented this concept in Bell's annual report, there were more than 4,000 local and regional telephone exchanges, most of which were eventually integrated into the Bell system.
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- In 1908, Theodore Vail presented the concept of network effects in the Bell Telephone Company's annual report. The report emphasized that the value of a telephone network depends on the number of users in the network, and that as the network grows, its value increases as well Vail argued that a number of independent telephone systems are integrated and operate as part of the Bell system, stated that the value of the network as a whole would increase (Wikipedia) (Cambridge).
- Vail's presentation in this annual report provided an important argument to justify the monopoly of telephone service and paved the way for the eventual integration of numerous local exchange stations into the Bell System. The report is considered an example of early theorizing of network effects
- [Theodore N. Vail and the Role of Innovation in the Modern Bell System | Business History Review | Cambridge Core](https://www.cambridge.org/core/journals/business-history-review/article/abs/theodore-n-vail-and-the-role-of-innovation-in-the-modern-bell-system/63DEDC8BBC392F6ABA72F9C3504FDFA0)
- > The network effect was popularized by Robert Metcalfe, described as [[Metcalfe's law]]. Metcalfe was one of the co-inventors of Ethernet... He argued that an Ethernet card must exceed a certain critical mass in order for a customer to enjoy the benefits of the network.
- 1980s.
- > The economic theory of network effects was significantly advanced between 1985 and 1995 by researchers Michael L. Katz, Carl Shapiro, Joseph Farrell, and Garth Saloner.
- [Network Effect - Understanding the Types and Economic Impact](https://corporatefinanceinstitute.com/resources/economics/what-is-network-effect/)
- [[network resources]] ďź[[Network Goods]]ďź
- Appearance date: 1980s
- Background: A concept based on network effects, where the more people use a good, the more valuable it becomes.
- That's a term that came about in the process of economists theorizing the above Metcalf story into an economic theory.<img src='https://scrapbox.io/api/pages/nishio/nishio/icon' alt='nishio.icon' height="19.5"/>
[Supermodularity
Appearance date: Late 1970s
Background: Proposed by Donald M. Topkis. Used for strategic decision making and innovation analysis (Princeton University Press).
Donald M. Topkisâ âSupermodularity and Complementarityâ develops the theory of complementarity and monotone comparative statics in economics. In this work, Topkis analyzes complementarity using superadditive functions and applies it to a wide range of economic models. In particular, it delves deeply into strategic interactions in decision problems, non-cooperative games, and cooperative games. Hyperadditivity theory is important as a methodology for maximizing gains through strategy combination and guiding optimal decision making
The above book was written in 1998.
Topkis, D. M. (1978). Minimizing a submodular function on a lattice. Operations research, 26(2), 305-321.
BACKGROUND: Based on hyperadditivity theory, a phenomenon in which multiple goods increase in value when used together (Princeton University Press).
Where does the term âSupermodular Goodsâ first appear?
The term âSupermodular Goodsâ was first used by Steven Weber to describe open source software at the University of California, Berkeley. It is described as an example of âanti-rivalâ goods whose use provides positive value to other users. The concept has been extended to many categories, including inventions and discoveries, legal systems, protocols, and standards, not just open source software (Beyond Public and Private).
Steven Weber proposed this concept in his 2004 book, âThe Success of Open Source. The book details the background of the success of open source software and its economic and political significance (Harvard University Press) (Wikipedia ) (Strathprints).
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Donald M. Topkisâ âSupermodularity and Complementarityâ develops the theory of complementarity and monotone comparative statics in economics. In this work, Topkis analyzes complementarity using superadditive functions and applies it to a wide range of economic models. In particular, it delves deeply into strategic interactions in decision problems, non-cooperative games, and cooperative games. Hyperadditivity theory is important as a methodology for maximizing gains through strategy combination and guiding optimal decision making
Where does the term âSupermodular Goodsâ first appear?