Network Effects in Technology Adoption: The Case of DVD Players
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چکیده
This paper analyzes a model of consumer adoption of DVD players (the hardware-side) and movie studios’ supply of movies on DVD discs (the softwareside). My primary focus is the estimation of complementarities between DVD player adoption and availability of content on DVD discs. The size of the complementarities determine the level of strategic inter-dependence between hardware and software firms, and thus play an important role in designing co-marketing strategies through which hardware and software firms can align their incentives. I estimate the parameters of the hardware adoption using household level panel data. To estimate the parameters of the software model, I use a cross section of movies released at different time periods. Estimated complementarities are statistically and economically significant. The hardware-side estimation shows that a 1% increase in new DVD releases during May 2001 would increase DVD player sales by 0.5%. The software-side estimation indicates that a 1% increase in DVD player installed base in May 2001 increases the number of new DVD releases by 0.19%. Finally, I present the importance of estimated complementarities from a practitioner’s stand point. In particular, I examine the amount of subsidy the movie studios would be willing to give to increase DVD player sales by 1 more unit.
منابع مشابه
Forthcoming, Journal of Economics and Management Strategy 2003 The DVD vs. DIVX Standard War: Empirical Evidence of Network Effects and Preannouncement Effects
In this paper, we empirically test for network effects and preannouncement effects in the DVD market. We do this by measuring the effect of potential (incompatible) competition on a network undergoing growth. We find that there are network effects. The data are generally consistent with the hypothesis that the preannouncement of DIVX temporarily slowed down the adoption of DVD technology.
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تاریخ انتشار 2003