The effect that describes goods becoming more valuable to a user as the total number of people who use that good grows larger is called the network effect. The network effect is a phenomenon where the value or utility a user derives from a good or service increases as more people use the same good or service. This creates a positive feedback loop where each additional user adds value to the network for all users
. For example, social media platforms, telecommunication devices, and online marketplaces become more valuable as their user base expands
. This effect is distinct from economies of scale, which relate to cost advantages from increased production, as network effects operate on the demand side by increasing users' willingness to pay due to the growing user network
