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Interrelationships

Network effects can be direct and indirect. Direct network effects are network effects from increased usage that directly leads to increased value (our example of being able to call more people as more of them own phones). Indirect network effects on the other hand, are derived from the availability of complementary goods and services. A good example of this is the fact that Mediawiki, the software running Wikipedia, is made more useful because many plug-ins have been developed for it by third parties.

Indirect network effects can be one- and two-sided. Most network-effects are one-sided, where the complementary product does not become more valuable as more of the primary are sold. An example are the now widely available protective covers for mobile phones. In two-sided network-effect the complementary product does become more valuable. For example in the case of on-line Journal-publications, which have not only been made more useful because of websites such as Scopus, IngentaConnect and Google Scholar, but as more articles appear on-line, these websites will also become more valuable. Cross-compatibility is the central issue here. In terms of social traps, two-sided network-effects are social chains.

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