The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players

Posted: 10 Mar 2000

See all articles by Neil Gandal

Neil Gandal

Berglas School of Economics, Tel Aviv University; Centre for Economic Policy Research (CEPR)

Michael Kende

Federal Communications Commission (FCC)

Rafael Rob

University of Pennsylvania - Department of Economics

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Abstract

In this paper we examine the diffusion of a hardware/software system. For such systems there is interdependence between the hardware-adoption decisions of consumers and the supply decisions of software manufacturers. Hence there can be bottlenecks to the diffusion of the system. We consider the CD-industry and estimate the (direct) elasticity of adoption with respect to CD-player prices and the (cross) elasticity with respect to the variety of CD-titles. Our results show that the cross elasticity is significant. Our model can be used to quantify the effect of various policies aimed at speeding up the diffusion of a system.

JEL Classification: L86

Suggested Citation

Gandal, Neil and Kende, Michael and Rob, Rafael, The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players. RAND Journal of Economics, Vol. 31, No. 1. Available at SSRN: https://ssrn.com/abstract=203378

Neil Gandal (Contact Author)

Berglas School of Economics, Tel Aviv University ( email )

Tel Aviv University
Tel Aviv 69978
Israel
+972 3 640 9907 (Phone)
+972 3 640 9908 (Fax)

HOME PAGE: http://www.neilgandal.com/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Michael Kende

Federal Communications Commission (FCC) ( email )

1919 M Street, NW
Washington, DC 20554
United States

Rafael Rob

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-6775 (Phone)
215-573-2057 (Fax)

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