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Network Effects and Game Theory

This article discusses the popular navigation app “Waze.” which allows users to identify and share road hazards, hiding police officers, accidents, etc. that they have encountered while driving along. Such information is useful for other drivers who might be planning to take a route that will pass through such “obstacles.” The main point that this article gets into is the idea of “network effects”, a simple concept that declares that certain things become much more useful/provide more utility for people as the number of people using that thing increases. Social media is one of the most popular examples, and the author shows that clearly it is also the case for Waze. After all, one wouldn’t get much use of out of the app if there was no one else on the app flagging obstacles; it would basically just be a user sharing information to himself!

That being said, I felt that this article bridged together the idea of network effects and game theory when it discusses how Waze gets users to actually get around to opening up the app and flag obstacles. As mentioned in the article, why would anyone take the time to do so if they don’t expect others to do so? People often just care about themselves. However, touching on the idea of the golden rule — to treat others the way you want to be treated — the article explains that Waze users take the time to do so in hopes that others will as well. Case in point, I think one can make a matrix for this situation: either a user does not take the time to log information on the app, and his/her payoff is low because following the golden rule many other users may not do so either. Or, the user can take the time to log information on the app, and following the golden rule he/she can expect others to do so as well and the payoff will be higher for everyone.

Obviously, there are several other factors that would need to be considered, but I think the idea of game theory definitely fit into the situation.


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October 2019