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    Consumer lock-in and network externalities

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    For each of the following products, could consumer lock-in or network externalities (or both) create a barrier to entry? Explain why or why not.

    a. Toothbrush
    b. DVD's
    c. Video games

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    Solution Preview

    Consumer lock-in occurs when consumers have invested in one particular brand and changing to another will result in a loss of their investment. This occurs with such things as video game consoles. Once having chosen a console (XBox or Nintendo, for example), the consumer is tied to it because it is ...

    Solution Summary

    This solution discusses how markets in with consumer lock-in and network externalities affect entry.