The network effect is a phenomenon whereby a product or service becomes more valuable as more people use it. This effect is commonly seen in technology and telecommunications, but it can apply to various sectors. There are two primary types of network effects: 1. **Direct Network Effects**: These occur when the utility of a service increases as more users join the network. For example, in social networking platforms like Facebook, the value to a user increases with the number of their friends who also use the platform.
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