This paper presents a classroom game that can be used to demonstrate network externalities, standardization, and switching costs. In the basic game students independently choose a technology whose value depends on the total number of students choosing that technology. In the next round, sequential decision-making is allowed which quickly leads to standardization. Introducing imperfect information and switching costs into subsequent rounds can lead to the real-world phenomenon of an inferior technology becoming the standard. This exercise can be used in Principles of Economics classes to teach these important concepts without requiring mathematical models. In more advanced classes, construction of the mathematical model behind the game may be assigned.
Economic models explain human behavior only to the degree that the underlying assumptions of the model are fulfilled. Consumer theory of rational choice has been applied to a wide array of situations. This paper examines the results of the model when a consumer considers bundles of goods, some of which may affect her self image. Under these conditions, wrong decisions are not easily corrected, but can more easily be reversed if the individual is able to forgive herself for having made the wrong decision.
This paper presents a classroom game that can be used to demonstrate network externalities, standardization, and switching costs. In the basic game, students independently choose a technology whose value depends on the total number of students choosing that technology. In the next round, sequential decision making is allowed that quickly leads to standardization. Introducing imperfect information and switching costs into subsequent rounds can lead to the real‐world phenomenon of an inferior technology becoming the standard. This exercise can be used in principles of economics classes to teach these important concepts without requiring mathematical models. In more advanced classes, construction of the mathematical model behind the game may be assigned.
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