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A small quibble: An example of a network effect is a chat app: if 1 person uses a chat app worldwide, that person can get literally 0 utility out of it. If 2
by logicallee 10y ago
A small quibble:
An example of a network effect is a chat app: if 1 person uses a chat app worldwide, that person can get literally 0 utility out of it.
If 2 people use it, they have a tiny amount of utility: there is a single other person who can use it.
If three billion people use it, they all have massive utility: they can talk with anyone.
So, without changing the product, the more people who use it,the more utility each person has.
By that standard, Uber has no network effect at all (0, not "weak"): I simply don't get more utility whatsoever from the number of other people using Uber in my city.
If there are 5 available Uber cars which can take me to my destination, it really, really doesn't matter whether another 1,500 Uber cars in that city are already in use or whether that is the total 5 Uber cars which are available.
This shows that there is 0 (not "weak") network effect.
- lxmorj 10y agoThat's not really true. There are two segmented populations that only "communicate" with those in the other group, but the value is dramatically tied to the number of people in the opposing segment. Riders and drivers need there to be a large population in each other to derive value from the app.
- logicallee 10y agoThat's not the definition of network effect, end of story. Look it up. You can't use precisely defined economic concepts willy-nilly. By that standard Amazon has network effects because the more products I can buy there the happier I am to shop there (Amazon side) and also the same goes for the other side, because the more customers it has the happier it is. Only problem is that's not the definition of the word we're arguing about.
- dnautics 10y agoTell that to Sidecar.
- AstralStorm 10y agoUnfortunately carrying multiple people also has anti utility or we'd all be driving in minibuses or public transport.