Network Effect

Definition

From the Wikipedia at http://en.wikipedia.org/wiki/Network_effect

"The network effect is a characteristic that causes a good or service to have a value to a potential customer dependent on the number of customers already owning that good or using that service.

One consequence of a network effect is that the purchase of a good by one individual indirectly benefits others who own the good - for example by purchasing a telephone a person makes other telephones more useful. This type of side-effect in a transaction is known as an externality in economics, and externalities arising from network effects are known as network externalities."