An Economic Analysis of Homepage Creators

Abstract

This paper considers the behaviors of homepage creators who supply as well as demand content on the Internet while facing content competition. The Internet makes possible an aspect we have not experienced with communication tools as telephone, radio, and TV. We present three propositions. The first is a condition for maximizing the social welfare, in which effects of viewer's externalities must be equal to its competitive effects. The second concerns the effect of network externalities when various sized asymmetric groups interconnect their networks, and the conditions under which one group benefits more than the others is dependent on the increasing or decreasing return to network size. The third states a condition that the amount of content under network externalities is socially insufficient. We finally indicate, by use of an example, the increasing return to network size in the Internet and the decreasing one in the telephone network, noting that the amount of content is socially insufficient on the Internet.