The network effect belongs to positive external effects. It describes that the use at a standard network-grows or, if its user number becomes larger. By this increased use the network for still more persons becomes interesting, the user number continues to increase, and thus again the use for all. One calls this positive feedback. If a critical mass is reached, then the user number rises exponentially.

The differs strongly from the network effect, since a common use is not the goal.

The network effect can be differentiated into direct and indirect network effects. With direct net effects the use increase results directly from physical net connections between two participants. Indirect network effects exist, if the use of the participants with the increases, this use increase however by direct communication relations between the participants do not develop. Examples for this are complementary products or learning effects.

One finds examples of the network effect at software - among other things with the Internet, with Microsoft Office or with Wikipedia - as well as with shares and within the range of telecommunications. The SMS function of a mobile telephone for example is only meaningful, if there are still many different, which likewise a mobile phone can possess and receive thus SMS.

At the network effect path dependence is problematic. Frequently it is more profitable to develop than it abolish inefficient structures further, since they are already very far common. This topic is relevant in the competition right.

Literature

Albert Barabsi: Linked. The of new science OF networks. Cambridge: Perseus Publishing. 2002

Carl Shapiro, Hal R. Varian: Information Rules. A Strategic Guide ton the network Economy. Harvard Business School press. 1998

See also

Penguin effect

Articles in category "Network effect"

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• Network effect - Wikipedia, the free encyclopedia
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