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mrežni efekat
When the value of a good to a consumer changes because the number of people using it changes. For instance, owning a phone becomes more valuable as more people are plugged into the telephone network. Network effects are sometimes called network externality, although this implies, often wrongly, that the benefits from being part of a network are a sort of market failure. They give a huge competitive advantage to the firm that owns the network. This incumbent advantage arises because a new entrant must persuade people to join a network that starts with fewer members, and thus may be less valuable to them than the network they are currently in. This is why markets for products with network effects are often dominated by only a few firms or a single monopoly. Some economists argue that many recent technological innovations, notably the Internet, have large positive network effects, which make possible much higher productivity and growth than in the past.
- Part of Speech: noun
- Synonym(s):
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- Industry/Domain: Economy
- Category: Economics
- Company: The Economist
- Product:
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