Direct and Indirect Network Effects: Are They Equivalent?
21 Pages Posted: 10 Jun 2002
Date Written: January 30, 2004
Network effects may be either direct or indirect. While many analyses conflate the two, I show that the ways in which direct and indirect effects influence technological standardization are quite different. Some parameter changes have opposite effects in the two models, and some factors which are irrelevant under direct effects are central under indirect effects. Compatibility in particular has a different interpretation and more subtle implications for standardization in the indirect model.
JEL Classification: L1
Suggested Citation: Suggested Citation