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network effect
(redirected from Network externalities)

   Also found in: Wikipedia 0.02 sec.

network effect

The resulting increased value of a product because more and more people use it. Telephones, fax machines and computer operating systems are examples. A product's success is due to compatibility and conformity issues, not that the product or technology may be superior or inferior to the competition. For more on the subject, read "Winners, Losers & Microsoft" by Stan J. Liebowitz and Stephen E. Margolis, published 1999 by The Independent Institute, Oakland, CA (ISBN 094599980-1). See tipping point.



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Network externalities exist when the value for a customer of belonging to a network increases with the number of customers in the network (Cremer, 2000).
Network externalities, competition, and compatibility.
During his early career at Bell Labs, he wrote a pioneering paper on the theory of network externalities.
 
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