Question

The decision of two banks to form a network of compatible ATMs will make the services of these two banks closer substitutes, and likely lead to more aggressive competition between them in deposit rates. At the same time there will be a positive “network effect” because account holders of both banks have access to a larger ATM network. This trade off between the benefits of compatibility and the costs in terms of tougher competition is a common one in high-technology industries where standardization is important. Can you think of other examples?

Answer 1

Another example can be cited from the health sector . Two private hospital can opt for a network of outdoor services or dispensaries to bring better and wider facilities for patients and can improve upon technology using joint ventures . So these private hospitals become alike to each other , making them close substitutes . So this increases competition between them to draw more patients and increase revenue . At the same time there will be more outdoor chambers catering to people's needs . this is the positive effect .