Network effect


We think a lot about network effects: the positive externalities caused by greater connectivity. A telephone network with 100 subscribers offers 99 calling opportunities whereas one with 10 subscribers offers only 9. That is why regulators had to fight so hard to ensure seamless interconnection that would give the subscribers on each network 109 calling opportunities and compel the operators to compete on some other aspect of service. Here below is a discussion of network effects in Face Book, that is among other things, causing us to place advertisements on it. For an individual member, the most powerful network effects may be indirect ones that come from the huge number of unknown other people in the Facebook world.