"The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players''
AbstractIn 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 which stem not from high prices but from the fact that the complementary product is not available. We consider the CD-industry and estimate the (direct) elasticity of adoption with respect to CD prices and (the cross) elasticity with respect to the variety of CD-titles. Our results show that the cross elasticity is indeed significant so that the presence of complementarities poses a serious bottleneck problem for the diffusion of the base product. We illustrate two applications of our methodology: (i) the business-policy question of how to subsidize a new base product which is contingent on a sufficiently large supply of complementary products & (ii) the public-policy question of what are the benefits of imposing backward compatibility on a new technology (e.g., high definition televisions).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences in its series CARESS Working Papres with number 97-10.
Date of creation:
Date of revision:
Contact details of provider:
Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297
Web page: http://www.ssc.upenn.edu/ier/paperier.html
More information through EDIRC
Other versions of this item:
- Neil Gandal & Michael Kende & Rafael Rob, 2000. "The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 43-61, Spring.
- Gandal, Neil & Kirkwood MP, Archy & Rob, Rafael, 1999. "The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players," CEPR Discussion Papers 2078, C.E.P.R. Discussion Papers.
- Neil G & al & Michael Kende & Rafael Rob, . "The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players," Penn CARESS Working Papers f4df6bc9bda3795823895c786, Penn Economics Department.
- Gandal, N. & Kende, M. & Rob, R., 1997. "The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players," Papers 21-97, Tel Aviv.
- K2 - Law and Economics - - Regulation and Business Law
- L80 - Industrial Organization - - Industry Studies: Services - - - General
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.:
- Michihiro Kandori & Rafael Rob, 1997.
"Bandwagon effects and long run technology choice,"
Levine's Working Paper Archive
1265, David K. Levine.
- Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
- Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 85-103, March.
- Joseph Farrell & Garth Saloner, 1984.
"Standardization, Compatibility and Innovation,"
345, Massachusetts Institute of Technology (MIT), Department of Economics.
- Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.