Concept explainers
Define network externality and explain how it differs from typical externality.
Explanation of Solution
Network externality refers to goods that exhibit network externalities, which signify the fact that the goods have got a wide usage and more number of people using it because of its various advantages.
The major difference in between network externality and typical externality is in network externality; the benefits are for all users, but it cannot say that the typical externality creates benefit for all. The reason is that receiving benefit depends upon the action of the third party.
Externality: Externality is the spillover of benefits or cost to the third party other than the immediate market participants.
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