Talk:Network effect/Archives/2012

Etc
This is a very business approach article, the illustrations are great, though Network effects did not appear with Internet. Any english-speaking economist around ? Network effects not always play first positively, than negatively.

The "roughtly proportional to the square" argument in the introduction is only true if the externality for every user is positively proportional to the number of users, which is rarely the case. It give a good insight to the influence of the thing, but Network effects should not be associated with "square" in the mind of entreprenuers if we want o avoid another Internet bubble.

There is no theory on negative network effects, thought it is as interesting as the first one, and given the business examples should be usefull.


 * Similarly, the article seems focused on actual networks, while the term is frequently applied to all externalities where the number of prior adopters is a term in the value available to the next adopter.   I could see renaming it network externalities and being more explicit in the positive / negative sides. Chrisvls 20:00, 7 Oct 2004 (UTC)


 * I removed Metcalfe's Law from the opening paragraph. It does not help with the explanation of the term and is only a minor finding in the context of network externalities/effects. On externalities vs. effects, the term was first introduced by Michael Katz and Carl Shapiro in 1985 as network externalities. The problem with externalities is that it ignores the possibility that the owner of the network can "internalize" the costs and benefits, so that an externality in the economic sense does not occur for the normal user. The term effects is more general and includes the special case of a network externality. Checking googlefight it seems this usage has caught on, and even the original authors use effects today. trialsanderrors 10:30, 28 March 2006 (UTC)

Confused Authors
Are ya sure that whoever wrote this isn't confusing network effects with the notion of increasing returns to scale?

Pyramid schemes
I wonder if pyramid schemes should be referred to as well, as a case of "when networks go bad". Anyone agree? If so, anyone want to write it up?--A bit iffy 00:01, 10 October 2005 (UTC)
 * I don't think they should be mentioned here. I kind of see the link, but Network Effects are talking about quite a different thing to pyramid schemes (positive externalities vs. exponential/viral growth). Psychobabble 04:57, 10 October 2005 (UTC)


 * I agree with Psychobabble. Both topics deserve their own articles. However a paragraph could be added in the network effect article explaining how the effect operates in pyramid schemes. mydogategodshat 17:08, 15 October 2005 (UTC)


 * I think pyramid schemes do deserve a brief discussion here. The logic is: Not all network effects are pyramid schemes, but all pyramid schemes are network effects.--Chesapean 14:11, 4 July 2006 (UTC)


 * I agree with Psychobabble that pyramid schemes should not be mentioned here, because it would be an unnecessary distraction and there are much better examples to refer to. Furthermost (talk) 01:32, 6 October 2011 (UTC)

Biased Viewpoint?
The sentence "This may go a long way to explaining the underlying source of consistent bad usability in Windows products." seems rather biased, has no references or backup - surely not NPOV?

I agree that this statement is not NPOV, and have removed it from the article. Gutzalpus 08:32, 6 December 2006 (UTC)

Negative and Positive Network Effects
The section about the automobile example is extremely vague, and I'm not really sure what it has to do with the network effect. Perhaps this could be elaborated on some more. —The preceding unsigned comment was added by 208.9.213.10 (talk) 08:25, 6 December 2006 (UTC).


 * I agree with you, so I'm cleaning it up. Let me know what you think. --Bubblesort (talk) 15:49, 22 February 2011 (UTC)


 * negative effects are now acknowledged in the lead. I have removed the tag. --Kvng (talk) 14:46, 6 June 2011 (UTC)

Benefits of the Network Effect
Under Benefits of the Network Effect there is a rather wild claim: "After a certain point, most networks become either congested or saturated, stopping future uptake. Congestion occurs due to overuse. The applicable analogy is that of a telephone network."

Say what? I don't know that saturation occurs in "most" networks, but it does not occur in this article's example of MS Office (where is the channel?), and probably not even in the immediate example of the telephone network. Why assume fixed network infrastructure? As long as the marginal benefit of adding one more member exceeds the marginal infrastructure cost, the network will continue to grow. However, growth may follow the S-shaped Diffusion of innovations curve if the population becomes depleted and the remainder sees little benefit in joining the network. A better discussion is found under the Metcalfe's law entry. Simplulo 13:50, 14 June 2007 (UTC)

Saturation occurs when the product or good is 'exclusionary', the use of one unit precludes the use of the unit by someone else, as in roads. Software is a non-exclusionary good. —Preceding unsigned comment added by 98.114.221.176 (talk) 23:32, 23 December 2008 (UTC)

This phrase uses economic terms but does not make sense: "positive utility to price ratio". I suggest: "marginal benefit exceeds price" or similar. Furthermost (talk) 01:16, 6 October 2011 (UTC)


 * The whole section needs rethinking/rewriting, but you're right about that phrase being nonsensical. I rephrased it. C RETOG 8(t/c) 03:42, 8 October 2011 (UTC)

first introduced by...
I'm not sure when or by whom the terms "network effects" and/or "network externalities" were first used, but I do know it was before 1994. For example:. C RETOG 8(t/c) 22:47, 27 August 2008 (UTC)
 * What's sometimes mentioned as the first clear exposition of the concept (though I don't think it used the terms) is Rohlfs, 1974 "A Theory of Interdependent Demand for a Communications Service", Bell Journal of Economics . C RETOG 8(t/c) 22:50, 27 August 2008 (UTC)

The article has some reference to much earlier uses by Theodore Vail and N. Lytkins, unfortunately they're not cited. If I can't hunt them down, or someone else fill them in, that'll probably have to get removed, which would be a shame. C RETOG 8(t/c) 00:41, 28 August 2008 (UTC)


 * Using Google Books, I've been able to find a couple of 1974 uses of "network externalities", but nothing earlier. The earliest use of the term "externality" in the technical economics sense according to the OED is 1957. I couldn't find any reference to Vail or Lytkins in the Rohlfs and the Katz-Shapiro articles (did I miss something -- can someone provide a page number?). So it seems unlikely that Vail and Lytkins used that term, though they may well have discussed the concept. --Macrakis (talk) 18:00, 11 August 2011 (UTC)


 * This article touches on how Vail exploited the network effect. It doesn't directly support the statements in the WP article however. I don't find anything on Lytkins except for echoes of the WP article. I don't find any useful discussion in Information Rules. It is probably time to replace the first paragraph with a 1957 OED reference. Not much to go on but better than starting at 1985. --Kvng (talk) 20:19, 13 August 2011 (UTC)

Relation to the concept of utility to the network effect
The BBC News cited research in which scientist used nonlinear dynamics to model the interplay between the number of religious respondents and the social motives behind being one. In the article, one of the researchers explains that the idea "social groups have a social status or utility." This seems similar if not related to the idea of the network effect. The BBC article also cited research by the same scientists that uses this same mathematical model applied to the utility of knowing a language. .


 * Yes, I believe those are both good examples of the network effect. --Kvng (talk) 20:08, 24 March 2011 (UTC)


 * Things like this are certainly network effects. I'd object to using the particular thing in your first link in this article because it's not an academically published study yet, and partly because WP:IDONTLIKEIT--what the study argues may or may not be true, but based on the popular press on it, I don't think it's a good-quality bit of research. C RETOG 8(t/c) 20:16, 24 March 2011 (UTC)