Thirdly, the increased importance of networks (like the Internet or credit card networks) and interoperable products (like computer components) can also create winner-take-all markets. Just as low marginal costs create economies of scale on the production side, networks can create ‘demand side economies of scale’ that economists sometimes call network effects. We see them at work when users prefer products or services that other people are flocking to. If your friends keep in touch via Facebook, that makes Facebook more attractive to you, too. If you then join Facebook, the site becomes more
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