Bian Du's List: Network value

• There are three issues to consider:

  • The difference between what Bob Metcalfe claimed and what ended up becoming Metcalfe’s Law
  • The units of measurement
  • What happens with large networks
• compatibly communicating devices
• both the “users” and “machines” formulations miss the subtlety imposed by the “compatibly communicating” qualifier, which is the key to understanding the concept.
• Now, that’s a far cry from the Internet, which is huge, where most machines cannot see one another and/or have nothing to communicate about…
• Zipf’s Law to large networks
• the issue I have is with the unit of measurement. Zipf’s Law applies to homogeneous populations
• or that matter, to the Internet, which is perhaps the most heterogeneous collection of nodes, people, communities, interests, etc.
• O(Sum^C(O(m_clogm_c))),
• Does this mean that at some point the value of a network starts going down
• It depends on infrastructure.

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• t the law "is a significant overestimate."
• "The fundamental fallacy underlying Metcalfe's (Law) is in the assumption that all connections or all groups are equally valuable," the researchers report.
• When two networks merge, "the smaller network gains considerably more than the larger one. This produces an incentive for larger networks to refuse to interconnect without payment, a very common phenomenon in the real economy," the researchers conclude.

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• The value of partitioning a network into N isolated components is 1/N'th the value of the original network.

• Negative network externalities can also occur, where more users make a product less valuable, but are more commonly referred to as "congestion" (as in traffic congestion or network congestion).
• At the critical mass point, the value obtained from the good or service is greater than or equal to the price paid for the good or service.