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Showing posts with the label network effects

Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Real Life Economics: Big Tech and Network Effects

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  In a few recent posts the increasing power of Big Tech and the possible consequences of the same were discussed. There is an increasing tendency of over reach by the Big Tech and thus has potential impact on the socio-economic-politic equilibrium of the society or the country. Their over reach was manifested in the US elections of late and has been in some ways manifesting itself in the Indian context too.   It would not erroneous to assume Big Tech is growing too big for their shoes and the states need to curb them. The roots of this power perhaps can be traced to early 2000s when Bill Clinton administration compromised with Microsoft in the anti-trust suits thus ensuring Microsoft was not split. Given the more than generous help given by the Big Tech in their campaign, President Biden is unlikely to go hard on them. In fact, this might embolden them to scale in their experiments in different countries. However a question at this stage would be what gives them the power to dictate t
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Evolving Business Models from Pipeline to the Platform

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Alexander Osterwalder developed a canvas to decode business model of a firm. The simplicity and linearity in terms of its organization, made it convenient and popular to shape and comprehend the business models being operationalized at the firm level. The canvas grounded on the rectilinear business and thus the assumption behind pipeline nature of the underlying firm value chain. A representative canvas is illustrated below Source: the image is borrowed from Wikipedia for a mere illustration of the model.  At the core of the business model, is the value proposition which the firm offer to its customers. In absence of clarity on value proposition, the firm is bound to agonise in terms of its business sustenance.   The key driver of the pipeline business model is the assumed flow from producers to the customers, the association being the value proposition. To any firm, there has to be a clarity of its key activities. The key activities delineate its business presence.   For a
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Calendronomics

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It would be stimulating to decrypt how January 1 st became the first day of the New Year across the world. There are perhaps more than 500 calendars across various cultures. Yet it was the Gregorian calendar that has emerged as the standard calendar across the world. While the roots of Gregorian calendar is religious, its adoption is pure geo-political economics. The calendar was issued as a correction to the then existing Julian calendar in Europe. The reform was an answer to solving the ‘Easter’ problem. Easter, as adopted by First Council of Nicea (325 AD) is celebrated on the Sunday after the ecclesiastical full moon on or after 21 March, which was adopted as approximation to the March equinox. The passage of time and the semantics of Julian calendar had led to divergence between the canonical date of equinox and the observed reality. Hence by early 16 th century, there were calls for reforms in calendar accompanied by ensuring that dates do not diverge in the future. This
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