Network Effect
Network externalities resemble economies of scale, but they are not considered such because they are a function of the number of users of a good or service in an industry, not of the production efficiency within a business. Economies of scale external to the firm (or industry wide scale economies) are only considered examples of network externalities if they are driven by demand side economies.
Read more about this topic: Returns To Scale
Famous quotes containing the words network and/or effect:
“A culture may be conceived as a network of beliefs and purposes in which any string in the net pulls and is pulled by the others, thus perpetually changing the configuration of the whole. If the cultural element called morals takes on a new shape, we must ask what other strings have pulled it out of line. It cannot be one solitary string, nor even the strings nearby, for the network is three-dimensional at least.”
—Jacques Barzun (b. 1907)
“In effect it seemed to him that, though honor might possess certain advantages, yet shame had others, and not inferior: advantages, even, that were well-nigh boundless in their scope.”
—Thomas Mann (1875–1955)