network effect

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network effect

The resulting increased value of a product because more and more people use it. Telephones, fax machines, computer operating systems and smartphones have been prime examples. A product's success is more about compatibility and less about its superiority to the competition. For example, Microsoft became hugely successful due to the network effect, because more and more people bought Windows PCs, and developers began to write programs for Windows only or at least much earlier than for the Mac version. In contrast, owing to the network effect, the company has also suffered, because although Nokia Windows Phones are excellent devices, they have a tiny market share compared to iPhone and Android, and fewer developers create apps for Windows Phones as a result. See tipping point and network externality.
References in periodicals archive ?
Accumulated ICT capital also builds the ICT infrastructure at the national level which generates network externalities and spillover effects across all firms and industries and thereby enhances the productivity in the aggregate economy.
Some argue that despite the existence of an international financial market that has grown enormously and decreased transaction costs, positive network externalities are still working to the benefit of the dominant currency today.
Network effect or network externalities are similar concepts related to peer acceptance.
A divorced economics professor applies the principles of microeconomics to his online search for a new life partner, attempting to find insights from search theory, signaling, adverse selection, statistical discrimination, supply and demand in thick markets, positive assertive matching, and network externalities.
This paper also retains linear transportation costs, and adds one feature to the model--negative network externalities.
Obviously, this includes the interests of African States that collect premiums on international incoming calls, in accordance with both ITU recommendations regarding network externalities and their own national policies.
Network externalities in microcomputer software: An econometric analysis of the spreadsheet market.
Path dependence and network externalities are subsidiary forces.
Network externalities are obvious when we think of telecoms and the internet: the more people 'connected' the greater the value of the service.
Technology Adoption in the Presence of Network Externalities, Journal of Political Economy Review, 94, 4, 1986, pp.
This may be true in certain telecommunications markets, where network externalities and benefits from compatibility are colossal.
Second, another fundamental aspect in all areas of transportation is the principle that network externalities exist.

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