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:
“How have I been able to live so long outside Nature without identifying myself with it? Everything lives, moves, everything corresponds; the magnetic rays, emanating either from myself or from others, cross the limitless chain of created things unimpeded; it is a transparent network that covers the world, and its slender threads communicate themselves by degrees to the planets and stars. Captive now upon earth, I commune with the chorus of the stars who share in my joys and sorrows.”
—Gérard De Nerval (1808–1855)
“But that intimacy of mutual embarrassment, in which each feels that the other is feeling something, having once existed, its effect is not to be done away with.”
—George Eliot [Mary Ann (or Marian)