Question

1. “A/B Test”:
   1. A type of experiment that is not readily conducted over the Internet on a firm’s website.
   2. A randomized group of experiments used to collect data and compare performance among two options (A and B).
   3. A/B testing is seldom used in refining the design of technology products.
   4. A non-randomized (“hand-picked”) group of experiments used to collect data and collect and compare performance among two options (A and B).
2. Switching Costs:
   1. Remove the barriers and friction involved for users who are considering migrating to a rival company.
   2. Weaken the value of network effects as a strategic asset.
   3. The costs a consumer incurs when moving from one product to another.
   4. The less friction available to prevent users from migrating to a rival, the greater the switching costs.                                                                                                                                                                               
3. Which of the following is false?
   1. Messaging is considered a two-sided market where the value-creating positive feedback loop of network effects comes mostly from same-side benefits of a single group.
   2. A one-sided market derives most of its value from a single class of users (e.g., instant messaging).
   3. It is possible that a network may have both same-side and cross-side benefits.
   4. Same-side exchange benefits are derived by interaction among members of a single class of participant (e.g., the exchange value when increasing numbers of instant message users gain the ability to message each other).                                                                                 
4. Which of the following is false?
   1. Unseating a firm that dominates with network effects can be extremely difficult, especially if the newcomer is not compatible with the established leader.
   2. Network effects might limit the number of rivals that challenge a dominant firm, but the establishment of a dominant standard may encourage innovation within the standard.
   3. A new rival in the market that is facing a strong, incumbent can often prevail simply by offering a superior product.
   4. An industry upstart must have an overwhelming additional value that exceeds the benefit of exchange, switching costs, and complementary products that are inherent to an incumbent.                                                                                                                                                                        
5. There are many strategies for competing in markets with network effects. Which of the following companies employed “subsidize product adoption” as the linchpin of their strategy for competing such markets?
   1. Citibank
   2. PayPal
   3. Nintendo
   4. Apple                                                                                                                                                                                   

Answer 1

Which of the following is false?

1. Messaging is considered a two-sided market where the value-creating positive feedback loop of network effects comes mostly from same-side benefits of a single group.
2. A one-sided market derives most of its value from a single class of users (e.g., instant messaging).
3. It is possible that a network may have both same-side and cross-side benefits.
4. Same-side exchange benefits are derived by interaction among members of a single class of participant (e.g., the exchange value when increasing numbers of instant message users gain the ability to message each other).

The option 1 is False, Since Messaging is considered as a one-sided market where the value-creating positive feedback loop of network effects come mostly from same side benefits of single group.

Which of the following is false?

1. Unseating a firm that dominates with network effects can be extremely difficult, especially if the newcomer is not compatible with the established leader.
2. Network effects might limit the number of rivals that challenge a dominant firm, but the establishment of a dominant standard may encourage innovation within the standard.
3. A new rival in the market that is facing a strong, incumbent can often prevail simply by offering a superior product.
4. An industry upstart must have an overwhelming additional value that exceeds the benefit of exchange, switching costs, and complementary products that are inherent to an incumbent.  

The option 3 is False, Since A new rival in the market simply by offering a superior product is not enough to face a strong firm because of network effect. The rival must have an additional value that exceeds the benefit of exchange, switching costs and complementary products.

There are many strategies for competing in markets with network effects. Which of the following companies employed “subsidize product adoption” as the linchpin of their strategy for competing such markets?

1. Citibank
2. PayPal
3. Nintendo
4. Apple               

PayPal employed "subsidize product adoption" as the linchpin of their strategy for competing such markets. PayPal, a financial service that allows its users to pay one another using credit cards, gave users a sign-up incentive to encourage adoption of its new effort and also succeeded in the market.

“A/B Test”:

1. A type of experiment that is not readily conducted over the Internet on a firm’s website.
2. A randomized group of experiments used to collect data and compare performance among two options (A and B).
3. A/B testing is seldom used in refining the design of technology products.
4. A non-randomized (“hand-picked”) group of experiments used to collect data and collect and compare performance among two options (A and B).

Option 4 is false since A/B Test is randomized test to collect data and collect and compare performance among two options (A and B).

Switching Costs:

1. Remove the barriers and friction involved for users who are considering migrating to a rival company.
2. Weaken the value of network effects as a strategic asset.
3. The costs a consumer incurs when moving from one product to another.
4. The less friction available to prevent users from migrating to a rival, the greater the switching costs.

Option 3 is True related to switching cost - the cost a consumer incurs when moving from one product to another. Other options tend to reduce or eradicate the switching cost completely to migrate from one product to another.