Question

Suppose that you observe a market with four firms, each with about 25% market share. What does it suggest about the following attributes of this market: network externalities, multi-housing costs, level of differentiation across the firm's offerings?

Answer 1

Answer:

It suggests that they are not doing anything competitively different.

Explanation:

Network externalities if well harnessed should bring about an increase in end users satisfaction and value derived.

Multi housing costs, ordinarily, and when taken as a whole, should results to an overall minimization of the total costs. Economics of scales and other resources are centrally allocated here, and the effect should be a gain to the entity.

Level of differentiation across firm's offerings - products or services, signals the procedures an organization adopt to mark the uniqueness of their products or services. It shows how distant they are among the other varying sets.

Thus, from the case given, the four firms have the same share of the market - 25%. The implication is that as far as we are concerned, their level of activities and postures in the market is same and/or similar. This ultimately cuts across the network externalities, multi housing costs and the level of differentiation of firm's offerings. They are thus not competitively different.