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:
“Of what use, however, is a general certainty that an insect will not walk with his head hindmost, when what you need to know is the play of inward stimulus that sends him hither and thither in a network of possible paths?”
—George Eliot [Mary Ann (or Marian)
“Human knowledge and human power meet in one; for where the cause is not known the effect cannot be produced. Nature to be commanded must be obeyed; and that which in contemplation is as the cause is in operation as the rule.”
—Francis Bacon (1560–1626)