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Network Effects > REFERENCES - Pg. 1010

Network Effects that link individual behavior and group outcomes. Representatives of this new direction are among oth- ers Becker and Murphy (2000), Brock and Durlauf (2001), Durlauf et al. (2001), Epstein and Axtell (1996), Manski (2000), and Young (2006). Seminal works in this field are Thorstein Veblen's Theory of the Leisure Class (1899) and Thomas Schelling's Micromotives and Macrobehavior (1978). Network effects are an integral part of the analysis in social economics because the starting point of social economics is that individuals are directly influenced by the choices of others when they take economic decisions. In economics, it is typically assumed that the behavior of individuals is not directly influenced by the behavior of others. 6 Of course, in economic terms individuals do influence each other, but always indirectly, namely through the price mechanism in the market. The social economics approach allows for both direct and indirect interaction between individuals and it follows the Austrian School of economics in putting methodological individualism at the core of its beliefs. Social economics maintains the individuality and the heterogeneity of the agents in the system (i.e., consumers economic interdependency between economic agents: the acts of one agent have a direct economic impact on another agent. We can clearly distinguish two forms of the network effect: direct network effects, related to a single product or technology and indirect network effects, related to complementaty products based on the same technological standard. In the past decades, a considerable body of knowledge has been built around network effects. reFerences Arthur, W. B. (1990). Positive feedbacks in the economy. Scientific American, (February), 80-85. Arthur, W. B. (1989). Competing technologies, increas- ing returns, and lock-in by historical small events. The Economic Journal, 99(March), 116-131. Arthur, W. B. (1988). Self-reinforcing mechanisms in economics. In P. W. Anderson, K. J. Arrow, & D. Pines (Eds.), The economy as an evolving complex system (pp. 9-31). Redwood City, CA: Addison-Wesley Pub-