Network Externalities
Network externalities, or network effects, arise when the value of a product to each user depends on how many other people use it.
What is Network Externalities?
An externality is a cost or benefit felt by a third party who has no control over it. Telephone networks are the classic example of positive network externalities: each new subscriber makes the network more valuable to everyone else. Negative network externalities, such as congestion, arise when more users reduce the benefit.