  Peer to peer networks will become an increasingly important distribution
channel for consumer information goods and may play a role in the distribution
of information within corporations. Our research analyzes optimal membership
rules for these networks in light of positive and negative externalities
additional users impose on the network. Using a dataset gathered from the six
largest OpenNap-based networks, we find that users impose a positive network
externality based on the desirability of the content they provide and a
negative network externality based on demands they place on the network.
Further we find that the marginal value of additional users is declining and
the marginal cost is increasing in the number of current users. This suggests
that multiple small networks may serve user communities more efficiently than
single monolithic networks and that network operators may wish to specialize in
their content and restrict membership based on capacity constraints and user
content desirability.
