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CS 52300-Eco-Law (Lecture 1 (Network Effect (network externality or demand…

- - - - Build a system that is already valuable, and once there are more users joining, the value of the platform will increase even more!
      - Using extrinsic motivations to attract users
        
        Payment
        
        Friend request to sign up
        
        Fee waiver
    - - Direct Network Effect (Same-side effect)
      - Indirect Network effect
        
        Supplemental/Collateral products
    - - Disruptive market
      - Open standards
    - - Congestion
      - Braess' Paradox
    - - Benefits
        
        Reduced Locked-in
        
        Commercialization
        
        Competition based on price
        
        Reduced uncertainty
      - Achieved by
        
        Coorporation
        
        Standardization
    - - Stock Exchange and Derivative Exchange
        
        Bid-Ask-spread
      - Softwares
        
        iPhone apps
      - Website
        
        Ebay for auction
        
        The more people, the more seller
        
        Google AdSense
        
        The more small blogs, the more advertisers
        
        Social networking
    - - Once there are enough a lot people on a wagon, more people will come 从众心理
  - - - Microsoft
      - Google
      - Apple
    - - Technology lock in
        
        QWERT
  - - - You must capitalize on time, other wise the FMA will becomes "first mover disadvantage" and help the new comers to learn more from your mistakes, which is called the "second mover advantage".
      - However, in most industries, patents confer only weak protection, are easy to invent around, or have transitory value given the pace of technological change. With their short life-cycles, patent-races can actually prove to be the downfall of a slower moving first-mover firm.
      - Types
        
        Technological leadership
        
        Preemption of scarce assets
        
        Switching costs / buyer choice under uncertainty
      - How to get it?
        
        First-mover advantages are typically the result of two things: technical proficiency (endogeneic) and luck (exogeneic).
        
        Technically competent companies are able to manufacture their products better, at a lower cost than their competitors, and have better marketing proficiency.
        
        Luck can also have a large effect on profits in first-mover-advantage situations, specifically in terms of timing and creativity.
        
        The first one who release a good working product is the first-mover, and not the one who did a lot of research
        
        Another common argument is whether first-mover advantage constitutes the initiation of research and development versus the entry of a new product into the market. Typically the definition is the latter, since plenty of firms spend millions in research and development that never result in a product entering a market.
        
        Early entry advantage doesn't directly means more profit though...
        
        Early entrants always have a natural advantage in market share, which does not always translate to higher profits.
        
        Patent is VERY crucial for YOU no matter what!!!!
        
        Certainly a pioneering firm will reap the benefits of early profits, but sometimes profits fall close to zero as a patent expires. This commonly leads to the sale of the patent, or exit from the market, which shows that the first-mover is not guaranteed longevity.
        
        没有版权 == 没有发言权
    - - Free rider effects
        
        Imitate the model and experience of the First Mover, and also hire the trainer person from their companies
      - Resolution of technological or market uncertainty
        
        The FM must take all the risk of non-standardization, thus the new comers can easily learn the proper standard and business model from the first mover. Also use proper way to interact with the market
      - Shifts in technology or customer needs
        
        The new comer can easily will with a less expensive but suit need product, which will make the FM be seen as inferior.
      - Incumbent inertia
        
        the firm may be locked into a specific set of fixed assets,
        
        the firm may be reluctant to cannibalize existing product lines, or
        
        the firm may become organizationally inflexible.[2]
    - - As a result, the second-mover can use its resources to focus on making a superior product or out-marketing the first-mover.
      - "The second mouse get the chesse
      - Amazon experienced what is known as a second-mover advantage, which has subsequently turned it into an S&P 100 company, and America’s largest online retailer. BookStacks was subsequently sold to Barnes and Noble.
      - An alternate method is to create an entirely new market segment and distribution channel, to establish a foothold in the industry, and then employ the me-too strategy.
  - - - The term was defined and first analyzed by the American scholar Clayton M. Christensen and his collaborators beginning in 1995, and has been called the most influential business idea of the early 21st century.
      - A disruptive process can take longer to develop than by the conventional approach and the risk associated to it is higher than the other more incremental or evolutionary forms of innovations, but once it is deployed in the market, it achieves a much faster penetration and higher degree of impact on the established markets.
      - Opportunities
        
        Idea Value Scope
        
        Digital Transformation $100 Trillion Global [46]
        
        Asteroid Mining $100 Trillion Global [47]
        
        Open borders $78 Trillion Global [48]
        
        Disruptive Technologies $14- $33 trillion Global [49] [50]
        
        E-Commerce [51] $22 Trillion Developing Countries
        
        Wealth Management $22 Trillion Global [52]
        
        Smart City Tech $20 Trillion Global [53]
        
        Artificial Intelligence $15.7 trillion Global [54]
        
        Climate Change Mitigation $7 Trillion Global [55]
        
        Advancing Women's Equality $12 Trillion Global [56] [57]
        
        Free Trade $11 Trillion Global [58]
        
        Circular Economy $4.5 Trillion Global [59]
        
        Closing Gender pay Gap $2 Trillion OECD [60]
        
        Longer Working Lives $2 Trillion OECD [61]
        
        Empower Young Workforce $1.2 Trillion OECD [62]
        
        Car Sharing $1 Trillion Global [63]
    - - Improve the performance in the existing market
    - - Unexpected, but does not affect the existing market
  - - - Spread sheet for PC
      - Social Networking for Internet
- - - - Antitrust law (U.S.)
      - Competition law (E.U.)
      - Auti-monopoly law (China, Russia)
      - Trade practices law (U.K., Australia)
  - - - SEC, FTC, EPA, FAA, FCC, NRC, ... etc.
  - - - NCC: Non-Compete Closure
- - - - Old: physical economy
        
        Price is the same as the cost to make a extra one.
        
        It's also means the least efficient producers can break even at a price of X
      - Software economy
        
        Give away for free, and earn profits in other ways
        
        Ads
        
        Employments
        
        Supports
    - - Metcalfe's Law
        
        Assumes 1) a larger N has no negative effects, and 2) that a user equally values all other users, ... [not true in practice]
        
        Total value of a network = $$N^2$$
      - Lock-in value
        
        Advantages
        
        Keep the value to the company (software)
        
        If the cost of switching is low, the company need to lower the price. O.w. increase the price.
        
        Disadvantages
        
        Incompatibility
        
        DEC's nonstandard cable connectors (1970s)
        
        IBM's PS/2 line (the clone won)
        
        Apple's early adoption of a ROM based OS
        
        User reaction
        
        More picky if the lock-in is expensive
        
        Want to be more compatible (interoperable blockchain)
        
        Only buy from the biggest vendor (and will reinforce the dominance [or perception thereof])
        
        Tends to result in 1 (or few) dominant vendor(s).
        
        Reasons
        
        Cost of hard/soft-wares
        
        Cost of converting files
        
        Cost of retraining staff
        
        Less interoperability with others, if the new platform is less dominant
      - :red_flag: More
        
        Government interlinking
        
        Pick the one that has the most political power, and not the best tech
        
        Egg or chicken
        
        Hardware company give incentive to software developers
      - The equilibrium point is determined by the price of software! In the special demand-supply curve.
    - - Advantage
        
        More market shares
        
        Dominant network effect
        
        Initially sell below cost, and make up for it later on.
      - Disadvantage
        
        Can be easily mimicked with very lot cost
        
        Help competitors to avoid mistakes
        
        Benefiting competitors by educate users for them
    - - In security, people tent to buy the cheaper security product, since they cannot distinct the difference
      - Market Failure
        
        The used car market is a lemon market, since the good valued car won't be on the market when the seller found them. (They will be sold or traded in other way)
    - - Will need to pay the price of less security
      - The bad drives out the good
        
        Gresham's Law
        
        If the law says: a copper coin with King's picture = a gold coin
        
        The Peter Principle by Laurence J. Peter
        
        Threat to incompetent, dismissed or set up to fail.
        
        People in a hierarchy tend to be raised to a "level of incompetence"
    - - Hackers are just too lazy to attack the uninteresting users
      - But for the profitable victim as an individual is a weakest link.
      - Public goods
        
        Properties
        
        Non-rivalrous: Its use by one person does not preclude its use by others
        
        Non-excludable: It is not feasible to exclude someone from using it
        
        Non-depletable: does not diminish when one more person use it
        
        E.g.: Air quality, law enforcement, national defense, information goods
        
        Issues
        
        Free ride
        
        solution
        
        Government solutions to market failures
        
        Gov. supplies the public good
        
        Pass laws that enable excluding free riders
        
        Regulations
        
        1 more item...
    - - The balancing of incentive is the key to get a disirable result! (Smart design to proven the frauds are also important!
      - Align the interest of principal and agents that controls more knowledge and information is the key issue in this problem.
      - Security engineer reward by efforts and outcome to win-win
      - Waiter quality by tip culture
      - Taxi base fee low and high to determine the routine distance
      - Cashiers receipt control (with 10% rewards to customers)
    - - Responsibility distribution
      - 10 % of people contribute,but 90% are just readers...
    - - Non-accountability
        
        The real trouble makers are free from punishment
      - Less caring about bad effects
        
        Cause more trouble
        
        Seat belt
        
        Insurance of software
        
        Protective padding for sports athletes
        
        Buggy codes for testers
    - - Let the user to pick by themselves
      - History
      - Data
      - People value different properties very differently
- - - - 法律要保障修车机构必须达到如实记录，否则监管部门可以重罚。举报的车主可以获利，车主不举报的一起罚。。。（Hyperledge）
    - - :red_flag:要善加利用那群聪明的技术人员，让他们有奖励机制
  - - - 缺点过多的记录很烦杂。现有的车子用不上。。。
      - 公司目前正面临两个挑战，一个是扩容难，另一个是成本居高不下。
        
        面对数百万辆汽车信息的记录工作：Micro transaction is a must!!!
      - 世界四大汽车制造商——宝马、福特、雷诺和通用汽车宣布成立一个名为移动开放区块链计划（MOBI）的组织，致力于促进区块链技术在汽车行业的应用。而博世就是该组织的创始成员之一。
  - - - :red_flag: 这里明显可以看出囚徒法则的作用，用奖励机制来“匿名”挑拨离间！
      - Differential Privacy
      - ZKP