A significant downside to network externalities is that
A) there may be large switching costs to consumers of changing products so that consumers end up using products with inferior technologies.
B) firms may network with unethical suppliers or distributors.
C) the costs of hiring celebrity endorsements may be very high.
D) there may be large switching costs to firms changing technologies.

Question

Quizplus · Accepted Answer

Network externalities can result in a situation where consumers may have to pay high switching costs if they decide to switch to a different product. This can be a significant downside because it can cause consumers to continue using products with inferior technologies just because they don't want to incur the switching costs. Similarly, firms may face high switching costs if they decide to change technologies, which can discourage innovation and competition in the market.

A Significant Downside to Network Externalities Is That