Introduction

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Connecting to a Phone Network

Suppose that you, as a consumer, are considering connecting to a telephone network. How much would you be willing to pay the phone service provider for the connection? Clearly, this amount depends on the number of people you would be able to reach. For instance, if there were very few people on the phone network (represented in A, to the left), then you probably wouldn't be able to reach many of your friends, and you would not pay very much. On the other hand, if the number of people on the network were large (represented in B), then you'd be able to call up almost anyone you want. In that case, you would probably be willing to pay a significant amount of money to the provider company. In fact, it wouldn't be far-fetched to assume that as the number of network users increases, the average amount of money a single user would be willing to pay for connecting to the network goes up as well.

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