Applied economics library
Economics for Founders Wiki
Economic frameworks for market design, incentives, network effects, competition, and the operating choices founders make.
Use this hub to understand how participants respond to one another, where feedback loops emerge, and which rules make a market more useful and durable.
A practical sequence
Start here
Follow these concepts in order for the shortest path from first principles to a usable operating decision.
- 01Available now
Opportunity Cost
Value the best alternative forgone when scarce founder time, cash, or capacity is committed.
- 02Available now
Marginal Cost & Marginal Revenue
Compare the incremental revenue and cost caused by the next customer, workload, or capacity block.
- 03Available now
Price Elasticity of Demand
Measure how quantity demanded responds to a price change over a defined interval and market.
- 04Available now
Network Effects
Identify when another relevant participant changes user value—and when the loop saturates or turns negative.
The full map
Explore by decision track
Track 01
Make the next decision
Put scarce resources, future trade-offs, and the economics of the next unit on the same decision frame.
Opportunity Cost
Value the best alternative forgone when scarce founder time, cash, or capacity is committed.
Sunk Cost Fallacy
Separate unrecoverable past spending from the future costs and benefits that should drive the next decision.
Fixed vs. Variable Costs
Classify costs by how they respond to an activity driver over a defined range and horizon.
Marginal Cost & Marginal Revenue
Compare the incremental revenue and cost caused by the next customer, workload, or capacity block.
Transaction Costs
Account for the cost of finding, negotiating, coordinating, enforcing, and exiting an exchange.
Track 02
Predict market response
Understand how buyers and competitors react when information, choice architecture, or price changes.
Price Elasticity of Demand
Measure how quantity demanded responds to a price change over a defined interval and market.
Information Asymmetry
Design signals, screening, and governance when one party knows something the other cannot cheaply verify.
Behavioral Economics for Founders
Design choices for real human attention and judgment while treating behavioral claims as testable hypotheses.
Game Theory & Price Wars
Evaluate a competitive move after likely rival responses, contribution effects, and runway risk.
Track 03
Design for scale and feedback
Test the cost, retention, and participation mechanisms that can make an advantage compound.
Economies of Scale
Test whether producing more quality-adjusted output actually lowers long-run average cost.
Switching Costs & Lock-In
Measure the loss, effort, delay, or risk customers expect when replacing one solution with another.
Network Effects
Identify when another relevant participant changes user value—and when the loop saturates or turns negative.
Two-Sided Markets
Design for cross-side network effects, liquidity, price allocation, and marketplace governance.
Winner-Take-All Dynamics
Test whether feedback loops are strong, global, and protected from multi-homing enough for a market to tip.
Built as a living reference
Every guide sits inside a decision path.
Published concepts stay linked from their track, while future additions enter the map with the context needed to use them well.
Open license
Reuse with attribution
This content is available for reuse. When referencing or republishing it, please credit Dr. Sarah Zou and link back to the original source.
Licensed under Creative Commons Attribution 4.0 International. You may share and adapt the material with appropriate credit.