Network Externalities

Types if network externality

Network Externalities can be of two types

Positive and Negative Network Externality

A positive network externality exists if the quantity of a good demanded by a typical consumer increases in response to the growth of purchases of other consumers. See the above example of Adam , which is positive externality. He is demanding it just because others are buying it for themselves. And if the quantity demanded decreases then it is a negative Externality. The concepts will be discussed by in the next posts.