This stimulated considerable interest in the topic, with the result that literally hundreds of papers devoted to network industries have been published. Moreover, this is a subject to which major contributions have been made by economic theorists, applied economists, economic historians, applied mathematicians, and engineers. For economists, the theory of network effects, or network externalities, or standardization, has wide applicability. There are basically two ways in which such externalities can occur. Indirect network externalities exist when an increase in the size of a network expands the range of complementary products available to the members of the network.
Many industries exhibit network externalities.
ATM networks, where the network externalities are indirect in that the larger the network the greater is the number of machines at which an ATM card can be used, and hence the greater is the value of the network to any user. Networks of users of computers that use the same operating system, e.g., the Mac network, where there are direct benefits associated with more efficient file transfers and indirect benefits associated with access to a wider range of applications software as the size of the network grows. Networks of users of compatible videocassette recorders, which exhibit what are probably small direct benefits from the ability to exchange cassettes and much larger indirect benefits from being able to purchase or rent a wider variety of pre-recorded cassettes that employ the same format. Networks of drivers of diesel-powered automobiles, who obtain the indirect benefit of having more widely available fuel and service facilities the larger the number of other drivers of such cars. In this section, I discuss unsponsored technologies, where users choose among competing technologies but the suppliers of those technologies either cannot, or choose not to attempt to, influence the nature or pace of adoption, so that the focus is entirely on the behavior of users.