Economics Externalities Questions
A network externality refers to the positive or negative impact that an individual's consumption or use of a product or service has on the utility or value of that product or service for others. It occurs when the value of a good or service increases as more people use it, leading to a positive externality, or decreases as more people use it, resulting in a negative externality.
On the other hand, a common resource, also known as a common-pool resource, refers to a resource that is non-excludable but rivalrous in consumption. This means that while anyone can access and use the resource, one person's use of it diminishes its availability or quality for others. Examples of common resources include fisheries, forests, and clean air.
In summary, the main difference between a network externality and a common resource is that a network externality relates to the impact of consumption on the value of a product or service for others, while a common resource refers to a resource that is shared and can be depleted or degraded through individual use.