When there are large network effects of adopting a new technology, firms often feel that government regulation or joint ventures can solve the:
A) problem excessive investment.
B) coordination problem.
C) elimination of the new technology.
D) market problem.

Question

Quizplus · Accepted Answer

Coordination problem refers to the difficulty of aligning the actions of different agents in a network. When there are large network effects, it becomes harder for firms to coordinate their efforts and adopt the new technology without the cooperation of others. In this context, government regulation or joint ventures can help to overcome the coordination problem and facilitate the adoption of the new technology by creating incentives for firms to cooperate and align their actions. The other options (A, C, and D) do not capture the core challenge that firms face in this context, which is the coordination problem.

When There Are Large Network Effects of Adopting a New