work into place. A close analysis of the seminal work on network economics reveals that the issue is significantly more complex than the conventional argument would lead one to believe. A consumer's decision to switch to a new network actually gives rise to two distinct and countervailing effects. On the one hand, the decision to join network enhances the value of the new network for those already connected to that network and those who will join that network in the future. The inability to capture all of the benefits created by its network adoption decision gives rise to a positive externality that can cause a consumer to refuse to join a new network even when it would be socially beneficial for it to do so, a phenomenon sometimes called lock-in or excess inertia. At the same time, the decision to join a new network also lowers the value of the old network by reducing the number of people using it. In effect, switching to a new network imposes costs on those connected to the old network that the person switching networks does not bear. Individuals who switch networks thus do not fully internalize all of the costs created by their actions. This may make that individual willing to adopt a new technology even when the costs to society exceed the benefits, a situation variously called excess momentum or insufficient friction. It is thus theoretically possible that network economic effects can cause network 22 The discussion that follows is based on Yoo (2002). Network Regulation Basics members to shift too quickly as well as too slowly. Which is the case depends upon which of these two countervailing effects dominates (Farrell and Saloner 1986; Katz and Shapiro 1992). In addition, the market failures identified by the formal economic models depend on the assumption that the relevant markets are either dominated by single firm or highly concentrated (Besen and Farrell 1994; Crémer et al. 2000; Katz and Shapiro 1986). The clear implication of these models is that policy makers should undertake a detailed examination o