http://www.businessweek.com/investor/content/feb2003/pi20030228_4861_pi044.htm

This article describes how certain companies were able to survive in a weak economy because of network effects. Due to network effects, companies with more users using their products are in a very strong position. This is because new users will tend to follow the leader in the industry. Also, current users will continue to use a market-leading product because switching to a different product would be difficult and expensive. The article calls this “customer lock-in.”

Several examples of companies benefiting from customer lock-in are given. Microsoft with Windows and Sony with the Playstation 2 are examples. Also eBay benefits from network effects and lock-in. As the number of buyers increases, a seller will get more bids and thus a higher price for an item. As the number of sellers increases, a buyer has a greater selection of items to choose from. eBay benefits from an increase in the number of users because it gets paid for each transaction that occurs. So, the article concludes that as more people use eBay, these buyers and sellers “become increasingly locked in.”