User demand for new systems software depends on:
- The number of users who have adopted the new system -- the more new systems users there are, the greater will be the demand for new systems content.
- The amount of content supplied for the new system and the degree to which later content complements (enhances the value of) or substitutes for earlier content -- the greater the degree of content complementarity, the more content will be demanded as more content is supplied. In contrast, when content is more substitutable, then user demand for content will become saturated, that is, it will be relatively lower when more content is available.
- The price of new systems content -- lower prices lead to greater demand.
For a specific configuration of parameters, the simulation model suggests that SW will see the following demand for new systems content when the price of content is $25:
In this example, when 20% of potential users have adopted the new system and 25% of content is supplied for the new system, then users will demand that 95% of content be available for the new system. For this scenario, the demand for new systems content, 95%, is greater than the supply, 25%. In this case, then, SW should either switch over more of his resources away from the production of old systems content and toward the production of new systems content, or raise the price of new systems content.
Alternatively, when only 5% of potential users have adopted the new system and SW has made 30% of content available for the new system, the supply of content, 30%, exceeds demand, 6%. In this case, SW should either decrease his supply of new systems content or decrease his price.