Network effect | EPFL Graph Search

In economics, a network effect (also called network externality or demand-side economies of scale) is the phenomenon by which the value or utility a user derives from a good or service depends on the number of users of compatible products. Network effects are typically positive, resulting in a given user deriving more value from a product as more users join the same network. The adoption of a product by an additional user can be broken into two effects: an increase in the value to all other users (total effect) and also the enhancement of other non-users' motivation for using the product (marginal effect). Network effects can be direct or indirect. Direct network effects arise when a given user's utility increases with the number of other users of the same product or technology, meaning that adoption of a product by different users is complementary. This effect is separate from effects related to price, such as a benefit to existing users resulting from price decreases as more users join. Direct network effects can be seen with social networking services, including Twitter, Facebook, Airbnb, Uber, and LinkedIn; telecommunications devices like the telephone; and instant messaging services such as MSN, AIM or QQ. Indirect (or cross-group) network effects arise when there are "at least two different customer groups that are interdependent, and the utility of at least one group grows as the other group(s) grow". For example, hardware may become more valuable to consumers with the growth of compatible software. Network effects are commonly mistaken for economies of scale, which describe decreasing average production costs in relation to the total volume of units produced. Economies of scale are a common phenomenon in traditional industries such as manufacturing, whereas network effects are most prevalent in new economy industries, particularly information and communication technologies. Network effects are the demand side counterpart of economies of scale, as they function by increasing a customer's willingness to pay due rather than decreasing the supplier's average cost.

AI-driven Prices for Externalities and Sustainability in Production Markets

Boi Faltings, Aris Filos Ratsikas, Panayiotis Danassis

Traditional competitive markets do not account for negative externalities; indirect costs that some participants impose on others, such as the cost of over-appropriating a common-pool resource (which diminishes future stock, and thus harvest, for everyone) ...

Cornell University2023

Incentive Mechanism in the Sponsored Content Market With Network Effects

Olga Fink, Mina Montazeri

We propose an incentive mechanism for the sponsored content provider (CP) market in which the communication of users can be represented by a graph, and the private information of the users is assumed to have a continuous distribution function. The CP stipu ...

IEEE-INST ELECTRICAL ELECTRONICS ENGINEERS INC2023

Numerical study on the scale effect of tip vortex cavitation induced by incoming velocities and scale ratios

Mohamed Farhat, Huaiyu Cheng, Mohan Xu

Large eddy simulations of tip vortex cavitation (TVC) around an elliptical hydrofoil is performed to study its scale effect. A satisfying agreement is obtained between the numerical and experimental data. It indicates that the scale effect of TVC is remark ...

PERGAMON-ELSEVIER SCIENCE LTD2023