Key Consumer Group for Late Comers in Network Effect Product Markets: A Multi-agent Modeling Approach

Abstract:- The first movers in network effect market enjoy the first-mover advantages. However, through proper strategy, late comers still hold a chance to win the competition. I divide the consumers into 5 categories (active rational, passive rational, active non-rational, passive non-rational and sheep herd) and simulate the market with multi-agent modeling method. Through analyzing the interactions between these consumer groups, I find that the active non-rational group is the most important consumer group for the late comers—late comers should focus on attracting this group first so that they may compete with the first movers. In support of my study, I also provide case studies of China’s blog service market and China’s online game market. Key-Word:- multi-agent modeling, network effect, consumer group, first mover advantage, consumer behavior, decision making, herd behavior. 1