id: 2400,1
title: The network effect, or, demand-side economies of scale.
date: 2023-03-06

The network effect, or, demand-side economies of scale.

This describes a circumstance wherein the value of a service or product is related to the number of people having adopted it (or something interoperable). Total effect refers to the value added to other users when adding a user, while marginal effect refers to the increased motivation to join for non-users.

This is different than economies of scale, where higher production means decreased production costs. It is the demand-side equivalent, however.[^rWP]