31 . Types of network externalities

Suppose that there were two competing types of high-definition DVD players, Greenbeam and Mosdef. Greenbeam enjoyed an initial advantage in the market for high-definition DVD players because there were more motion-picture production companies offering movies compatible with its system.

Which of the following is an illustration of a network externality?

A. Mosdef benefited from more consumers buying Greenbeam DVD players.

B. Consumers bought Mosdef players in increasing numbers, while Greenbeam lost market share and eventually went out of business.

C. More production companies adopted the Mosdef format for their movies because the Mosdef player had the superior format, despite the fact that more consumers purchased Greenbeam players.

D. Consumers bought Greenbeam players in increasing numbers, while Mosdef lost market share and eventually went out of business.