Thursday, April 27, 2006

Network Effect

Wikipedia: "The network effect is a characteristic that causes a good or service to have a value to a potential customer dependent on the number of customers already owning that good or using that service.

"One consequence of a network effect is that the purchase of a good by one individual indirectly benefits others who own the good - for example by purchasing a telephone a person makes other telephones more useful. This type of side-effect in a transaction is known as an externality in economics, and externalities arising from network effects are known as network externalities. This is also an example of a positive feedback loop."

No comments: