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Facilitating Adoption of Internet Technologies and Services with Externalities via Cost Subsidization
Journal article   Open access   Peer reviewed

Facilitating Adoption of Internet Technologies and Services with Externalities via Cost Subsidization

Steven Weber
ACM transactions on Internet technology, v 17(4), pp 1-29
30 Nov 2017
DOI: https://doi.org/10.1145/3091109
Featured in Collection :   UN Sustainable Development Goals @ Drexel
url
http://arxiv.org/abs/1409.0090View
Submitted Open Open Access (License Unspecified)

Abstract

This article models the temporal adoption dynamics of an abstracted Internet technology or service, where the instantaneous net value of the service perceived by each (current or potential) user/customer incorporates three key features: (i) user service affinity heterogeneity, (ii) a network externality, and (iii) a subscription cost. Internet technologies and services with network externalities face a “chicken-and-egg” adoption problem in that the service requires an established customer base to attract new customers. In this article, we study cost subsidization as a means to “reach the knee,” at which point the externality drives rapid service adoption, and thereby change the equilibrium service fractional adoption level from an initial near-zero level to a final near-one level (full adoption). We present three simple subsidy models and evaluate them under two natural performance metrics: (i) the duration required for the subsidized service to reach a given target adoption level and (ii) the aggregate cost of the subsidy born by the service provide. First, we present a “two-target adoption subsidy” that subsidizes the cost to keep the fraction of users with positive net utility at a (constant) target level until the actual adoption target is reached. Second, we study a special case of the above where the target ensures all users have positive net utility, corresponding to a “quickest adoption” subsidy (QAS). Third, we introduce an approximation of QAS that only requires the service provider adjust the subsidy level a prescribed number of times. Fourth, we study equilibria and their stability under uniformly and normally distributed user service affinities, highlighting the unstable equilibrium in each case as the natural target adoption level for the provider. Finally, we provide a fictional case study to illustrate the application of the results in a (hopefully) realistic scenario, along with a brief discussion of the limitations of the model and analysis.

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UN Sustainable Development Goals (SDGs)

This publication has contributed to the advancement of the following goals:

#9 Industry, Innovation and Infrastructure

Source: SDGs in the Output

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Web of Science research areas
Computer Science, Information Systems
Computer Science, Software Engineering
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