What is NETWORK EFFECTS?

A single person’s effect from using a good or a service on the total perceived value of that product or service for others. The more people who use a product or service, the higher its value becomes to a similar group. Some examples are the telephone and social networks. As a larger group uses a telephone, it becomes more essential to a larger group. As more people join a social network, the site holds greater value to the people who belong. Also known as network externality.

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