Network effect
Phenomenon by which the value or utility a user derives from a good or service depends on the number of users of compatible products.
- Network effect103 related topics
Monopoly
Market with the "absence of competition", creating a situation where a specific person or enterprise is the only supplier of a particular thing.
Network externalities: The use of a product by a person can affect the value of that product to other people. This is the network effect. There is a direct relationship between the proportion of people using a product and the demand for that product. In other words, the more people who are using a product, the greater the probability that another individual will start to use the product. This reflects fads, fashion trends, social networks etc. It also can play a crucial role in the development or acquisition of market power. The most famous current example is the market dominance of the Microsoft office suite and operating system in personal computers.
Vendor lock-in
In economics, vendor lock-in, also known as proprietary lock-in or customer lock-in, makes a customer dependent on a vendor for products, unable to use another vendor without substantial switching costs.
The distributive property (cost to resist the locally dominant choice) alone is not a network effect, for lack of any positive feedback; however, the addition of bistability per individual, such as by a switching cost, qualifies as a network effect, by distributing this instability to the collective as a whole.
Positive feedback
Process that occurs in a feedback loop which exacerbates the effects of a small disturbance.
![Positive feedback is a mechanism by which an output is enhanced, such as protein levels. However, in order to avoid any fluctuation in the protein level, the mechanism is inhibited stochastically (I), therefore when the concentration of the activated protein (A) is past the threshold ([I]), the loop mechanism is activated and the concentration of A increases exponentially if d[A]=k [A]](https://hyperleap.com/images/4028cc2eddd301ca048ebafdd2c0b9c9/200-b5a86cd5abae5208a05d2439ccca0eae.png)
Another sociological example of positive feedback is the network effect.
Track gauge
Distance between the two rails of a railway track.
The value or utility a user derives from a good or service depends on the number of users of compatible products – the "network effect" in economics.
Business model
Organization creates, delivers, and captures value, in economic, social, cultural or other contexts.
Network effects business model
Critical mass (sociodynamics)
Sufficient number of adopters of a new idea, technology or innovation in a social system so that the rate of adoption becomes self-sustaining and creates further growth.
This is due to the fact that interactive media have high network effect, where in the value and utility of a good or service increases the more users it has.
Metcalfe's law
Proportional to the square of the number of connected users
Metcalfe's law characterizes many of the network effects of communication technologies and networks such as the Internet, social networking and the World Wide Web.
Two-sided market
Intermediary economic platform having two distinct user groups that provide each other with network benefits.
Two-sided markets represent a refinement of the concept of network effects.
American online social media and social networking service owned by Meta Platforms.
In The Facebook Effect, David Kirkpatrick stated that Facebook's structure makes it difficult to replace, because of its "network effects".
Porter's five forces analysis
Method of analysing the operating environment of a competition of a business.
Demand-side benefits of scale – this occurs when a buyer's willingness to purchase a particular product or service increases with other people's willingness to purchase it. Also known as network effect, people tend to value being in a 'network' with a larger number of people who use the same company.