Network externality

Wireless power is adopted easily in some applications. Toothbrushes, for example, and in UV lamps for water desinfection. But penetration in offices and living rooms is limited today, even though consumer tests show that users like wireless power very much.

The problem with wireless power in offices and living rooms is that the perceived value increases with the number of different products that can be charged wirelessly. In other words, only few consumers are prepared to pay US$ 50 for a dedicated charger. That perception changes when a wireless charger services many products.

In economics this effect is called a 'network externality'. Products with a strong network externality benefit from co-operation between companies. Consumers see more value when many companies introduce products that work together. That's why companies work together on the standardization of wireless power. They all benefit from increased sales.

Products with strong a network externality are hard to introduce in the market. On the other hand, once successful, the interface tends to stay around. New products benefit from interoperability with the installed base, and the perceived value of alternative solutions remains low.

When network externalities are strong it is, therefore, risky to invest in products that don't work with the established standard. It can be surprisingly expensive to go against the flow.