Mathew effect

Newcomers prefer to attach to existing and dominant nodes—furthering their dominance.

Preferential attachment

First mover…

• advantage
  • tech leadership (ahead on the learning curve)
  • preemption of scarce assets (at early/low cost)
  • switching costs / buyer choice under uncertainty (hard for people to switch)
• disadvantage
  • free rider effects (benefits off R&D of 1st mover)
  • risky in face of market uncertainty
  • harder to adopt to immediate shifts in demand
  • incumbent inertia

egs??

egs of disruptive innovation?

egs??

• Chromebook; GoPro

Law school students and suits

How?

What social attributes lead to WTA markets?

1. relative rank (zero-sum) rather than absolute performance
   • common in status or positional goods
2. disproportionate & concentrated rewards
   • their rewards are disproportionately higher than the relative difference
   • often arising from mass markets and
   • “deep-pocket” markets (a few price-insensitive will pay anything to have the best)
3. overcrowding (overconfidence; thrill-seeking; status-seeking; or intrinsic joy)
4. network effects (something is more valuable the more people use it)
   • often leading to lock-in

(Frank & Cook 1995, “The winner-take-all society”, p. 24)

Effects?

• consumers benefit (we can enjoy the best)
• the mis-allocation of talent and resources (e.g., suits for interviews)
  • impair late bloomers
• growing income inequality (i.e., 10% edge yields 10,000% gain, like Olympians)
  • unfair

Where else do we see winner-take-all??

Relevance to online communities?

QICs

What can upset the dominate online communities?

Are all zipfian communities winner-take-all?

No, you can have the Mathew affect for other reasons such as preferential attachment.

Wrap up

Write a mnemonic for conditions of WTA.

• DORN: Disproportionate rewards, Overcrowding , Relative rank, Network effects

• Using one of the mnemonics, what were the four attributes of winner-take-all social systems?

▶