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Big companies’ power in networks

Source: http://www.technologyreview.com/blog/mimssbits/27196/

Recently, Amazon unveiled its new Kindle products including a tablet, Kindle Fire. On one hand, it offers people another choice to choose besides Apple’s IPad. On the other hand, Amazon is going to use the same leverage Apple possesses to give publishers of content on its tablet basically the same terms that Apple arrived at, namely, a 30 percent commission on all sales. Under this situation, a consortium of France’s most-read papers is trying to renegotiate these terms with Apple. Because Google’s Android App store offers much better terms, which is a 10 percent commission sales and better access to customer data.

In the article above, the news shows ideas about bargaining and power in Networks. We can consider Apple, Amazon and all kinds of publishers as nodes connected by edges. Each edge between companies and publishers stands for all sales made. According to the courses we take, we know that there are four proposals in powerful networks that can make a node hold a powerful position in the network. The first one is dependence. All the publishers need Apple and Amazon to help them to sell digital products, so they dependent on Apple and Amazon. The second one is exclusion. Since Apple and Amazon have many publishers to choose, so they can exclude any publisher. The third is satiation. Apple and Amazon can acquire value at a greater rate and receive an unequal share of value between them and polishers, so big companies become satiated. The last one is betweenness. Since Apple and Amazon have many edges linked to other publishers, so the betweeness of big companies is very larger. All these four proposals make Apple and Amazon become powerful positions in node. Under this situation, they can gain more in negotiation. That is why Apple and Amazon make some restricted requires on publishers. These publishers have to accept these conditions. Good news is that since Google Android App store offers much better terms to publishers, the outcomes of this network becomes unstable. Based on the definition of stability, no node X can propose an offer to some other node Y that makes both X and Y better; we find that Google is offering a better offer to all kinds of publishers.  By choosing Google’s offer, both publishers and Google will be better. Under this situation, publishers can think about renegotiate with Apple. After the renegotiation, outcomes will be balanced again.

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