Exam: Principles Of Economics And Business 2 (Track Digital Firm) 2023-2024 PDF

Economics and Business Academic Year 2023-2024 EXAM: PRINCIPLES OF ECONOMICS AND BUSINESS 2 (TRACK DIGITAL FIRM) 6011P0212 DATE AND TIME OF THE EXAM: 02-02-2024, 9.00 – 11.00 DURATION OF TH...

Economics and Business Academic Year 2023-2024 EXAM: PRINCIPLES OF ECONOMICS AND BUSINESS 2 (TRACK DIGITAL FIRM) 6011P0212 DATE AND TIME OF THE EXAM: 02-02-2024, 9.00 – 11.00 DURATION OF THE EXAM: 2 HOURS IDENTIFICATION: During the examination you must be able to prove your identity by means of a valid student ID card, valid passport, ID card or driving license. EXAM RULES: The Rules and Guidelines of the Examinations Board 2023-2024 apply to this exam; make sure you adhere to all elements thereof. Violation of the Rules and Guidelines does not only invalidate your exam, but could also constitute fraud. Students who are in violation or suspected of fraud will be referred to the Board of Examinations. Mobile telephones or other electronic equipment should be switched off and stored in a locker or if no lockers are available in a bag or briefcase next to the examination table. The bag or briefcase should be closed at all times. During the exam you are not allowed to go to the toilet (unless, by way of exception, this is approved by the Examiner or Head invigilator). RESOURCES DURING THE EXAM You may only have a pen and a ruler on your table and, in case of a handwritten multiple choice exam, a pencil and an eraser, unless supplementary aids are indicated on this cover page of the examination. The use of graphing and/or programmable calculators during an examination is never permitted, unless it is explicitly stated on this cover page of the examination that their use is permitted. If scrap paper is used, it is mandatory to write your name and student number on every sheet of paper before use. Reference works that contain annotations are not allowed. Supplementary aids specifically for this exam: o No supplementary aids are permitted o Scrap paper o Simple calculator o English dictionary SPECIFIC INFORMATION FOR THIS EXAM Optional space for extra information specific to this exam if not already covered in instructions above. [Remove paragraph ‘SPECIFIC INFORMATION FOR THIS EXAM’ if not required]. DECLARATION OF AUTHENTICITY By submitting answers in this exam, you affirm that those answers are yours, and yours alone. You affirm that you have written all texts and decided upon the answers without any outside assistance or the use of inadmissible sources or tools. You affirm that you were using your own personal UvA credentials to login on the exam computer and/or identified yourself during the exam and to submit your work. You are aware of all stipulations and procedures in the Rules and Guidelines of the Examinations Board 2023-2024, and that those will apply to this exam. 1  1. Birkinshaw (2018) states that “the bigger the firms, the bigger they are likely to become”. To which principle in network economics is he referring to? a. The Long Tail principle b. The Lock-in effect c. The Matthew Effect d. The First Mover Advantage 2. On the one hand standards facilitate an interoperable infrastructure for network goods. On the other hand, standards are the main weapons in the competition between providers of network goods. To what network economics phenomenon is referred here? a. Paradox of network effects b. Incompatibility of network standards c. Path-dependency of standards d. Paradox of network standards 3. Complements describe goods and services built on a platform that enhance the value of a core good to a network via......... Which word should be filled in on the blank? a. Same-side network effects b. Strong-tie network effects c. Cross-side effects d. Direct network effects 4. The market dominance of the big tech platforms is often compared with the classic monopolies of the 19 and the 20 th century. How do, according to Rahman and Thelen (2019), the new big tech platforms differ from the old monopolies in dominating the market? a. By displacing existing firms in the market b. By controlling through ownerships c. By gaining the largest market share d. By occupying a structural position in the market 5. Some economists equate network effects with market failure. Why do they think this is the case? a. Because network effects frequently result in contestable markets b. Because strong network effects often lead to dominance of early market leaders c. Because network effects often lead to buyers’ markets d. Because strong network effects require state intervention 6. Cowan and Tabarrok (2016) state that the best products may not always win, because… a. In markets with strong network effects, consumers always chose for the lowest price b. In markets with strong network effects, the market can lock in the lower quality product or network c. In markets with strong network effects, the first mover advantage prevents newcomers to enter the market d. In markets with strong network effects, predatory pricing prevents the envelopment of new products and services 7. What is, according to the so-called Chicago School, the main argument in defending the concentration of economic power by firms? a. Firm size and concentrated industry structures reflect efficiency gains and thus serve the consumer interests. b. The state doesn’t have the legitimate power to intervene in the market c. Markets work best without state intervention d. Firms with concentrated economic power appear to be the best survivors 2  8. In their article about the Hub Economy Iansiti and Lahkani (2017) express their concern about the market concentration of the Big Tech platforms. How can Big Tech Platforms contribute to decreasing market concentration, according to the authors? a. Agree on lower prices b. Facilitate multihoming c. Lower switching costs d. Increase transparency about market strategies 9. In the table below you see the number of network participants mentioned. Calculate the network value of the network with respectively 56, 74 and 18 network participants? Number participants 56 74 18 in the network Network Value x y z a. X = 1540; Y = 27012; Z = 162 b. X = 3080; Y = 5402; Z = 306 c. X = 3080; Y = 2701; Z = 306 d. X = 1540; Y = 2701; Z = 162 10. Have a look at the graph below. Which ‘law’ is illustrated here and together with which other economic phenomenon does it explain the exponential growth of digital technologies? a. Metcalfe’s Law and the invention of the Internet b. Moore’s Law and the increasing returns of computing power c. Methcalfe’s Law and the significant fall in price of computer power d. Moore’s Law and the significant fall in price of computer power 11. Video-games are a hit-driven business. In this case a platform needs relatively few hits to generate network effects. How do Zhu and Iansiti (2019) call this type of network effects? a. Direct network effects b. Accumulated network effects c. Strong network effects d. Multi-sided network effects 3  12. Google’s subsidizes the use of Chromebooks in education. Why do digital platforms subsidize hardware investments? a. Subsidized hardware investments strengthen direct data capture of platforms b. Subsidized hardware investments strengthen indirect hardware capture of platforms c. Subsidized hardware investments strengthen the lock in of incumbents in highly regulated industries d. Subsidized hardware investments strengthen the competitive advantage of digital platforms 13. What type of network effects does Amazon generate by using recommender systems? a. Same-side network effects b. Multiple-sided network effects c. Indirect network effects d. Weak network effects 14. Thumbtack, a marketplace that connects consumers with local service providers such as electricians, guitar teachers etc., charges for lead generation before customers and providers decide to work together. What does Thumbtack try to avoid? a. Disintermediation b. Local competition c. Intermediation d. Clustering of local providers 14. To get its platform started OpenTable first persuaded one group to join the platform, and once enough members of that group have done so, they persuaded the other group to join. How is this critical mass strategy called? a. Future value strategy b. Small segment strategy c. Two-step strategy d. ZigZag strategy 15. In 2021 whistleblower Frances Haugen criticized Facebook for prioritizing profit making over protecting privacy and security. This negative news impacted the use of Facebook. What type of network effects are important here particular for advertising companies? a. Direct network effects b. Same-side negative network effects c. Cross-side negative network effects d. Indirect network effects 16. Metcalfe's law states that the financial value or influence of a telecommunications network is proportional to the number of connected users of the system. Based on this insight it is possible to calculate the number of network connections and based on these also the network value. Suppose there are three small networks A, B, and C. A connects 47 people, B connects 33 people, and C connects 25 people. Calculate the difference between the total sum of the network connections of these three, separate networks and the network connections of the merged, big network? a. 5460 b. 7102 c. 3551 d. 3818 17. Pagani distinguishes three control point constellations (CPC). One of them is the loosely coupled CPC. Which one resembles most with the organizational forms that are described by Rahman and Thelen (2019)? a. The closed vertically integrated firm b. The network of contracts c. The platform company 4  d. The nexus of reciprocal relationships 18. According to Rahman and Thelen (2019) platform companies differ from network-of-contracts companies as far as benefitting from ‘patient capital’. What is meant by patient capital? a. The investor is willing to invest in a business with no expectation of turning a quick profit. b. The investor is willing to abstain from return of his/her invested capital c. That the investor is a friend or family of the entrepreneur d. That the investor demands that new products will be patented 19. What is an important flaw of Metcalfe’s Law? a. That there are also negative network effects b. The assumption that all network connections have equal value c. That this Law cannot be applied to small networks d. That this Law cannot be applied to multi-sided platforms 20. Which type of effect is generated when an increase in the number of game console users creates a rise in number of game developers (and vice versa)? a. cross-side network benefits. b. one-sided market benefits c. same-side network benefits d. direct network benefits 21. To solve the chicken-egg problem digital platforms can develop different strategies. What type of strategies do they need to develop? a. Leverage strategies b. Seeding strategies c. Coring strategies d. Encapsulating strategies 22. Uber riders and drivers experience low multi-homing costs for their ride-hail services. This is threatening Uber’s competitive position because a. Customers experience low switching costs. b. Uber faces strong competition from competitors. c. Riders and drivers can use multiple competing platforms at low costs. d. Drivers benefit from the use of multiple platforms by the riders. 23. To avoid the risk of being disintermediated platforms often withhold contact information of the users of the platform. What, according to Zhu and Iansiti (2019), is an alternative and often an effective strategy to deal with the risk of being disintermediated? a. Charging transaction fees b. Guarantee privacy and security c. Providing complementary services d. Formalize (via contracts) transactions as soon as possible 5  24. Which platform strategy is described here: the set of activities or strategic moves that a sponsor can use to shape market dynamics and gain momentum when there are competing platforms? a. Coring b. Tipping c. Enveloping d. Networking 25. Information goods are called to be non-rival. What is meant by this? a. That people cannot be excluded from it b. That consumption of it does not reduce the amount of it c. That information goods are public goods d. That information goods are relatively cheap to produce 26. According to Ozalp et at (2022) digital platforms can achieve rapid growth through: a. Technological intermediation AND reduction of costs for transacting, matching, and innovating b. Economies of scale AND cost-efficient production of services c. Economies of scope AND innovative pricing strategies d. Indirect data capturing AND reduction of costs for transacting, matching, and innovating 27. Which process is described here: Penetration of infrastructures, economic processes, and governmental frameworks of digital platforms in different economic sectors and spheres of life. a. Infrastructurization b. Assetization c. Platformization d. Financialization 28. Which of the following statements of Predatory Pricing is correct? a. Predatory pricing weakens the position of those companies that are already in the market b. Predatory pricing raises prices when competitors enter the market c. Predatory pricing generates high entry barriers for newcomers in the market d. Predatory pricing is beneficial for consumers in the long term 29. In the Digital Market Act the EU appoints Big Tech companies as gatekeepers based on a set of criteria. On which principle is this legislation based? a. Consumer welfare principle b. Structuralist view on market concentration c. Non-European origin of these Big Techs d. Market failure principle 30. To grow fast Zoom (videotelephony service) deliberately chose a... a. Indirect effects strategy b. External facing strategy c. Same-side network effects strategy d. Multiple network effect strategy 31. In 2011 Facebook bought Snaptu from the Israelian start-up Moblica for $78 mln. What was the strategic reason of Facebook to buy this application? 6  a. Envelopment of new functionalities b. Reaching out to low-end device users c. Developing of new functionalities d. Reaching a critical mass 7  32. Mark Zuckerberg launched Threads this year in compete with Twitter (now X). How would you call this competitive strategy? a. Encapsulating strategy b. Network strategy c. Coring strategy d. Envelopment strategy 33. Selling your products on the Amazon platform is sometimes called “swimming with sharks”. What is meant by this? a. as a seller you face the competition of other sellers on the Amazon platform. b. other sellers are moving into your ‘product space’. c. Amazon is giving access to too many third-party sellers. d. as a seller you face the risk of misappropriation of value by Amazon. 34. With Bing Microsoft entered the market of web search in which Google has a dominant position. How would you call Microsoft’s strategy? a. Second mover strategy b. Envelopment strategy c. Low barrier entry strategy d. Killing zone strategy 35. Amazon allows third-party sellers to sell their products on the Amazon platform. During the last lecture we concluded that the Amazon platform is not a neutral marketplace. What is meant by this? a. That Amazon is committed to keep prices low b. That the market rules on the Amazon platform are set by Amazon c. That Amazon is outcompeting its third-party sellers d. That Amazon doesn’t allow third-party sellers to raise prices 36. According to Pan et al, platform companies can employ different development strategies. One of them is to organize a set of activities that a sponsor can use to fortify platform boundaries and promote a collective identity in a platform. What is the name of this strategy? a. Delegating strategy b. Meshing strategy c. Coring strategy d. Encapsulating strategy 37. Google made several attempts to become a social network in order to attack Facebook’s dominant position in the social network market. How is this Google strategy called? a. Seeding strategy b. Network strategy c. Envelopment strategy d. Second mover strategy 8  38. Android allows app developers to develop apps for different mobile devices on the Android platform in order to a. create same-side network effects b. create cross-side network effects c. create reverse network effects d. create direct network effects 39. Smart phones have incorporated many different functionalities, which is sometimes called convergence. Which type of strategy of digital platforms is driving this convergence process? a. Multihoming b. Envelopment c. First mover advantage d. Tipping 40. What, according the Rahman and Thelen (2019), is an important weakness in the US antitrust law? a. The weak small- and medium enterprises orientation b. The strong anti-state orientation c. The strong pro-consumer orientation d. The strong pro-monopoly orientation 9