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

Clements, Matthew T., Direct and Indirect Network Effects: Are They Equivalent? (January 30, 2004). Available at SSRN: or

Matthew T. Clements (Contact Author)

St. Edward's University ( email )

3001 South Congress Avenue
Austin, TX 78704
United States
(512) 428-1321 (Phone)

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