Network Effects – Power of the Mass
https://www.business2community.com/tech-gadgets/what-are-network-effects-02221322
As I contemplated attending Harvard’s WECode conference, I found myself trying to find out who else was attending and if it was worth the travel. Suddenly, this brought me to the network effects discussed in the article above. The article discusses network effects and how a service’s value increases as the number of its users increases. It also mentions the different types of network effects and how to best utilize them. Specifically, two-sided network effects occur when an indirectly affected service that increased in value leads to the original service to increase in value as well. For the WECode conference, if there were only 5 people going, then the conference would not benefit me and there would be no point in going. But as the amount of people increases, the more I can get out of the conference. In addition, as the amount of people increases, the conference would have more funding to invite more and better-known speakers. This leads to a cycle where both the funding of the conference and the amount of people attending the conference increases.
This article relates to what we learned in class because we have talked about network effects and how the reservation price that a person has for a certain product increases as the fraction of the population that buys the product increases. When a person thinks a greater fraction of the population will attend the WECode conference, he will think that he can network more with the people there and can get more things out of the conference. This way, the reservation price of the people will also go up because they will be more willing to pay a bit more because they will value the conference more. Due to network effects, more people will attend the WECode conference when they think a greater fraction of the population will attend, thereby increasing their reservation price as well.