Economists have been writing about the Network Effect since 1974, intrigued by the notion that, once a network is established, scarcity isn’t the source of perceived value; instead, ubiquity is. In the physical world, the more fishers who come to a lake, the fewer fish each one will catch; the lower the benefit, and hence the value, for each one. In the cyberworld, on the other hand, the more people who participate in an online network, the greater the benefit-the larger the network, the greater the likelihood that you’ll find the person, information, or resource you’re seeking. The difference between these two analogies is simple. Fishers aren’t adding fish to the lake; online users are.
Sources: Business 2.0, WebCab Limited
Subjects: Economics, IT / Technology / E-Business