Indirect Network Effects and the Product Cycle: Video Games in the U.S., 1994-2002
AbstractThis paper examines the importance of indirect network effects in the U.S. video game market between 1994 and 2002. The diffusion of game systems is analyzed by the interaction between console adoption decisions and software supply decisions. Estimation results suggest that introductory pricing is an effective practice at the beginning of the product cycle, and expanding software variety becomes more effective later. The paper also finds a degree of inertia in the software market that does not exist in the hardware market. This observation implies that software providers continue to exploit the installed base of hardware users after hardware demand has slowed.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 04-01.
Length: 31 pages
Date of creation: Oct 2004
Date of revision: Oct 2004
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indirect network effects; penetration pricing; software variety;
Other versions of this item:
- 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.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-26 (All new papers)
- NEP-COM-2006-08-26 (Industrial Competition)
- NEP-ICT-2006-08-26 (Information & Communication Technologies)
- NEP-INO-2006-08-26 (Innovation)
- NEP-NET-2006-08-26 (Network Economics)
- NEP-TID-2006-08-26 (Technology & Industrial Dynamics)
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