LawLab: Fulfilled-expectations Equilibrium Demand

This lab focuses on a static demand model for a single homogeneous network good, the FEED curve, critical mass, the underlying one-shot non-cooperative game, dynamic expectation adjustment, and the interaction between network demand and supply-side pricing.

What we'll be trying to do

  • Specify a demand system where willingness to pay depends on consumer type and expected network size.
  • Show how fulfilled expectations generate the FEED curve.
  • Explain why upward-sloping segments are unstable and constitute the critical-mass locus.
  • Interpret FEED points as Nash equilibria of a one-shot consumer game.
  • Show that below-cost pricing may be needed for takeoff, and that competition can impede network development.

How to read this lab

  • Use the left panel to alter the primitives.
  • Use the first graph to see baseline demand and the FEED curve.
  • Use the second graph to see whether expectations are fulfilled at the current price.
  • Use the third graph to study critical mass, marginal cost, and startup pricing.

Graph 1. Baseline demand and FEED curve

The thin line is inverse baseline demand. The bright curve is pfe(n). Horizontal price cuts show how one price may yield multiple equilibria.

Graph 2. Fulfilled expectations condition

The bright curve plots actual demand D(p,n) against expected size n at the current price. Intersections with the 45-degree line are expectations-fulfilling equilibria.

Graph 3. Critical mass and supply-side startup

The shaded region below marginal cost highlights cases where startup may require pricing below marginal cost to move the network past the unstable segment.

Teach the lesson section by section

These notes follow the lesson's logic rather than turning it into a generic platform-dominance story.