Abstract

http://ssrn.com/abstract=484361
 
 

Citations



 


 



Empirical Analysis of Indirect Network Effects in the Market for Personal Digital Assistants


Harikesh Nair


Stanford University - Graduate School of Business

Pradeep K. Chintagunta


University of Chicago

Jean-Pierre H. Dube


University of Chicago - Booth School of Business


Quantitative Marketing and Economics, Forthcoming

Abstract:     
We present a framework to measure empirically the size of indirect network effects in high-technology markets with competing incompatible technology standards. These indirect network effects arise due to inter-dependence in demand for hardware and compatible software. By modeling the joint determination of hardware sales and software availability in the market, we are able to describe the nature of demand inter-dependence and to measure the size of the indirect network effects. We apply the model to price and sales data from the industry for Personal Digital Assistants (PDAs) along with the availability of software titles compatible with each PDA hardware standard. Our empirical results indicate significant indirect network effects. By July 2002, the network effect explains roughly 22% of the log-odds ratio of the sales of all Palm O/S compatible PDAs to Microsoft O/S compatible PDAs, where the remaining 78% reflects price and model features. We also use our model estimates to study the growth of the installed bases of Palm and Microsoft PDA hardware, with and without the availability of compatible third party software. We find that lack of third party software negatively impacts the evolution of the installed hardware bases of both formats. These results suggest PDA hardware firms would benefit from investing resources in increasing the provision of software for their products. We then compare the benefits of investments in software with investments in the quality of hardware technology. This exercise helps disentangle the potential for incremental hardware sales due to hardware quality improvement from that of positive feedback due to market software provision.

Keywords: High-technology products, indirect network effects, positive feedback, endogeneity

JEL Classification: C10, L10, M3, O32

Accepted Paper Series


Not Available For Download

Date posted: January 8, 2004  

Suggested Citation

Nair, Harikesh and Chintagunta, Pradeep K. and Dube, Jean-Pierre H., Empirical Analysis of Indirect Network Effects in the Market for Personal Digital Assistants. Quantitative Marketing and Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=484361

Contact Information

Harikesh Nair (Contact Author)
Stanford University - Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
650-736-4256 (Phone)
HOME PAGE: http://faculty-gsb.stanford.edu/nair/index.html

Pradeep K. Chintagunta
University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)
Jean-Pierre H. Dube
University of Chicago - Booth School of Business ( email )
5807 South Woodlawn Avenue
Chicago, IL 60637
United States
HOME PAGE: http://gsb.uchicago.edu/fac/jean-pierre.dube
Feedback to SSRN


Paper statistics
Abstract Views: 674

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.812 seconds