Abstract
The previous review of the valuation literature review revealed that currently there are no convincing solutions that account for network effects in software markets. The goal of the following chapter is to integrate the previously derived insights into a process framework for valuation in software markets. First, an overview of all phases of the framework is provided before the respective phases are depicted in detail.
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Notes
- 1.
Please confer Sect. 5.5.
- 2.
Please confer (Porter 2008) for the updated five forces industry model and for further information on the structure-conduct-performance paradigm.
- 3.
Please confer Sect. 3.3.
- 4.
Please confer sect. 3.3.8.
- 5.
Please note the similarity to the phases of the previously presented product life cycle in Sect. 3.3.1.
- 6.
Please note that revenues are a product of sales volume times price.
- 7.
Please confer (Meffert 2000) for a broader overview.
- 8.
Please confer Sect. 5.3 and (Groehn 1997) for further details.
- 9.
Please confer also Chap. 11 and Sect. 13.3. This is a conceptual overview that is refined in the upcoming chapters of this book.
- 10.
Please note that the research on Complex Networks distinguishes a variety of network typologies which are discussed for didactic reasons in the next part of the book. Please confer IV.
- 11.
Please consider Sect. 7.2.
- 12.
Please confer Chap. 7 for a discussion of various adoption approaches.
- 13.
Please confer Sect. 2.3 for further details.
- 14.
Please refer to Sect. 2.3.3 for the real options typology.
- 15.
Please confer Sect. 4.3.
- 16.
Please confer Sect. 4.4.
- 17.
Please note that a simple sum of the option values would not be accurate, since the pay-off profiles of the respective underlyings would change simultaneously. Instead it is necessary to consider a synthesized underlying. Please confer (Trigeorgis 1996) for further details on the derivation of this synthesized underlying.
- 18.
The interactions refer to the change in the value of the underlying in dependence of the exercise of a real option. Hence, it may be necessary to account for the probabilities of exercise of previous options. This probability can be approximated by a partial differential equation with respect to the underlying of the closed-form solution in the form of a so-called delta. This states the probability of exercise for an option at the current moment. However, it is important to note that this delta-hedging is only possible for a specific set of parameters. Please confer Arditti (1996) and Hamilton (2000).
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Kemper, A. (2010). Network Effects Valuation Framework For Software Markets. In: Valuation of Network Effects in Software Markets. Contributions to Management Science. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-2367-7_8
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DOI: https://doi.org/10.1007/978-3-7908-2367-7_8
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