The Economics of Internet Companies

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Ayla Ogus, Michael de la Maza, Deniz Yuret (1999)
The Economics of Internet Companies. Computing in Economics and Finance, Fifth International Conference of the Society for Computational Economics. Boston College.


In this paper, we analyze the effects of brand loyalty and network effects on the fortunes of Internet companies in an agent-based model. We find that brand loyalty and network effects produce interesting dynamics when included together in a simulated Internet which are very different from the dynamics observed when only one or neither of these effects are present. If both brand loyalty and social communication are high, a loyal user can be convinced to switch web sites, thus causing large and traumatic changes in the fortunes of the Internet companies.