Abstract

http://ssrn.com/abstract=2194662
 


 



Indirect Network Effects and the Quality Dimension: A Look at the Gaming Industry


Jin-Hyuk Kim


University of Colorado at Boulder

Jeffrey Prince


Indiana University - Kelley School of Business

Calvin Qiu


ICF GHK

May 1, 2013


Abstract:     
There is a considerable debate among both practitioners and researchers on the relative importance of quality and network effects in high-tech industries. In this paper, we re-examine the interaction between software quality and indirect network effects in the classical static framework. Both theoretically and empirically, we provide the conditions under which variation in software quality generates larger (or smaller) indirect network effects than that predicted from the standard methodology that simply uses aggregate counts of software variety. We apply our framework to the 7th-generation video game console market with quality-differentiated titles and show that in this market the use of aggregate software measures underestimates the indirect network effects by approximately 30 percent.

Number of Pages in PDF File: 40

Keywords: indirect network effects, vertical differentiation, video game industry

JEL Classification: L14, L82, M21

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Date posted: December 30, 2012 ; Last revised: April 9, 2014

Suggested Citation

Kim, Jin-Hyuk and Prince, Jeffrey and Qiu, Calvin, Indirect Network Effects and the Quality Dimension: A Look at the Gaming Industry (May 1, 2013). Available at SSRN: http://ssrn.com/abstract=2194662 or http://dx.doi.org/10.2139/ssrn.2194662

Contact Information

Jin-Hyuk Kim
University of Colorado at Boulder ( email )
Campus Box 256
Boulder, CO 80309
United States
Jeffrey Prince (Contact Author)
Indiana University - Kelley School of Business ( email )
1309 East Tenth Street
Bloomington, IN 47405-1701
United States
Calvin Qiu
ICF GHK ( email )
No Address Available
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