Measuring Network Effects in a Dynamic Environment

28 Pages Posted: 31 Jul 2010  

Gautam Gowrisankaran

University of Arizona - Eller College of Management; National Bureau of Economic Research (NBER)

Marc Rysman

Boston University - Department of Economics

Minsoo Park

Sungkyunkwan University - College of Economics

Date Written: May 1, 2010

Abstract

This paper proposes methods for identifying indirect network effects with dynamically optimizing consumers purchasing a durable hardware good and associated software. We apply this model to a data drawn from the DVD player and titles markets. We observe model-level prices, sales and characteristics of DVD players and sales and availability of DVDs at the level of the month for 10 years. We augment these aggregate data with household survey data on player holdings. In our model, forward looking consumers buy possibly multiple DVD players over time and benefit from the evolution of the titles market. We address issues of clustering, spurious correlation and endogeneity.

Keywords: Empirics, Network Effects, DVD players

JEL Classification: C25, C61, D91, L11, L12, L16, L68, M31

Suggested Citation

Gowrisankaran, Gautam and Rysman, Marc and Park, Minsoo, Measuring Network Effects in a Dynamic Environment (May 1, 2010). NET Institute Working Paper No. 10-03. Available at SSRN: https://ssrn.com/abstract=1647037 or http://dx.doi.org/10.2139/ssrn.1647037

Gautam Gowrisankaran (Contact Author)

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

HOME PAGE: http://econ.arizona.edu/faculty/gowrisankaran.asp

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marc Rysman

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-3086 (Phone)
617-353-4449 (Fax)

Minsoo Park

Sungkyunkwan University - College of Economics ( email )

25-2 25-2, Sungkyunkwan-Ro, Jongno-Gu
Seoul
+82-02-760-0427 (Phone)
+82-2-760-0946 (Fax)

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