Which of the following is the best example of a "network" good?

Question

BlackTom AI · Accepted Answer

To evaluate which option best fits a 'network' good, we need to consider how value grows as more people participate and adopt the good.
Option 1: Edison Electricity Company - the more people who use it, the better quality it becomes. This captures the idea of network effects in some services, but historically electricity networks do benefit from scale, reliability, and infrastructure investments; however, the statement is less precise about a good whose value directly increases as more users join in the same platform or network. It’s not as clean a match for the classic 'network good' concept as others.
Option 2: Nike shoes - the more people who wear it, the lower the cost of production. This describes economies of scale in manufacturing rather than a network effect. The value of the product doesn’t rise for each additional user in the same network; rather, unit cost may fall with volume, but the product’s inherent value to a user doesn’t increase simply because others also use it.
Option 3: Wikipedia - the more who use it, the better quality it is (and the less need for wikipedia competitors). This is a textbook example of a network good: its value increases as more users contribute, edit, and rely on the information, creating a richer, more comprehensive resource. It also raises barriers to entry for competitors because the network of contributors and readers improves with size.
Option 4: Dasani water - the more people who buy this brand, the better quality it becomes. This statement would imply quality improvements driven by increased purchasing, which is not how a network good typically operates. Brand quality does not automatically improve with more buyers; it might even be unaffected or depend on supply and branding rather than user network effects.
In summary, the best fit for a network good is Option 3, because it embodies the core idea that the product’s value rises with more participants in the network (contributors and users), while the other options describe either standard economies of scale or misinterpretations of network effects.

Princip of Econ-Microeconomics Quiz 9

Which of the following is the best example of a "network" good?

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