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Measuring Network Effects in a Dynamic Environment

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Author Info

  • Marc Rysman

    ()
    (Department of Economics, Boston University)

  • Gautam Gowrisankaran

    ()
    (University of Arizona, HEC Montreal and NBER)

  • Minsoo Park

    (Chung-Ang University)

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    Abstract

    This paper proposes methods for identifying indirect network e ects with dynamically optimizing consumers purchasing a durable hardware good and associated software. We apply this model to 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 monthly for 10 years. We augment these aggregate data with household survey data on player holdings. In our model, forward look- ing consumers buy possibly multiple DVD players over time and ben- e t from the evolution of the titles market. We provide a framework for addressing a series of econometric problems which have not been systematically addressed before.

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    Bibliographic Info

    Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2011-061.

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    Length: 35 pages
    Date of creation: Jan 2011
    Date of revision:
    Handle: RePEc:bos:wpaper:wp2011-061

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Harikesh Nair & Pradeep Chintagunta & Jean-Pierre Dubé, 2004. "Empirical Analysis of Indirect Network Effects in the Market for Personal Digital Assistants," Quantitative Marketing and Economics, Springer, vol. 2(1), pages 23-58, 03.
    2. Hiroshi Ohashi, 2003. "The Role of Network Effects in the US VCR Market, 1978-1986," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(4), pages 447-494, December.
    3. Gautam Gowrisankaran & Daniel A. Ackerberg, 2003. "Quantifying Equilibrium Network Externalities in the ACH Banking Industry," Working Papers 03-06, NET Institute, revised Sep 2003.
    4. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    5. Chiou, Lesley, 2008. "The timing of movie releases: Evidence from the home video industry," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1059-1073, September.
    6. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
    7. Marc Rysman, 2004. "Competition Between Networks: A�Study of the Market for Yellow�Pages," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 483-512, 04.
    8. Matthew T. Clements & Hiroshi Ohashi, 2004. "Indirect Network Effects and the Product Cycle: Video Games in the U.S., 1994-2002," CIRJE F-Series CIRJE-F-261, CIRJE, Faculty of Economics, University of Tokyo.
    9. Sangin Park, 2004. "Quantitative Analysis of Network Externalities in Competing Technologies: The VCR Case," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 937-945, November.
    10. Thierry Magnac & David Thesmar, 2002. "Identifying Dynamic Discrete Decision Processes," Econometrica, Econometric Society, vol. 70(2), pages 801-816, March.
    11. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
    12. Rosse, James N, 1970. "Estimating Cost Function Parameters without Using Cost Data: Illustrated Methodology," Econometrica, Econometric Society, vol. 38(2), pages 256-75, March.
    13. Daniel A. Ackerberg & Marc Rysman, 2000. "Unobservable Product Differentiation in Discrete Choice Models: Estimating Price Elasticities and Welfare Effects," Econometric Society World Congress 2000 Contributed Papers 1675, Econometric Society.
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