Economic sense of Metcalfe's Law
Gangmin Li · 2008
Metcalfe’s Law was widely accepted and used to explain internet boom. It has drawn a lot of criticism in explaining Web 2.0. This paper connects Transaction Cost Theory (TCT) with Metcalfe’s Law. It not only proves that they are consistent but also makes economical sense of the Law by introducing the second critical mass in to Metcalfe’s Law. Efforts are also used to explain exiting Web effect and future of Web evolutions. It concludes that any format of the future Web evolution has to have cost reduction in its core.