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Hedonic price indexes for spreadsheets and an empirical test of the network externalities hypothesis

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Author Info
Neil Gandal (Tel Aviv University)
Abstract

In this paper, I first estimate hedonic price equations for computer spreadsheet programs, and then use the analysis to empirically test whether network externalities exist in this industry. The study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the Lotus platform and for spreadsheets that offer links to external data bases, and a smaller premium for spreadsheets that offer local area network compatibility. These results support the hypothesis that the computer spreadsheet market exhibits network externalities. Finally, the quality-adjusted (real) price index of computer spreadsheets declined by approximately 15 percent per year from 1986-1991.

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Paper provided by EconWPA in its series Industrial Organization with number 9309002.

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Date of creation: 13 Sep 1993
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Handle: RePEc:wpa:wuwpio:9309002

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  1. Gandal, N., 1992. "Hedonic Price Indexes for Spreadsheets and an Empirical Test of the Network Externalities Hypothesis," Papers 18-92, Tel Aviv.
  2. Gilbert, Richard J, 1992. "Symposium on Compatibility: Incentives and Market Structure," Journal of Industrial Economics, Blackwell Publishing, vol. 40(1), pages 1-8, March. [Downloadable!] (restricted)
  3. Robert J. Gordon, 1989. "The Postwar Evolution of Computer Prices," NBER Working Papers 2227, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Ernst R. Berndt & Zvi Griliches, 1993. "Price Indexes for Microcomputers: An Exploratory Study," NBER Chapters, in: Price Measurements and Their Uses, pages 63-100 National Bureau of Economic Research, Inc. [Downloadable!]
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  5. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May. [Downloadable!] (restricted)
  6. Church, Jeffrey & Gandal, Neil, 1993. "Complementary network externalities and technological adoption," International Journal of Industrial Organization, Elsevier, vol. 11(2), pages 239-260, June. [Downloadable!] (restricted)
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  7. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-79, April. [Downloadable!] (restricted)
  8. Shane M. Greenstein, 1993. "Did Installed Base Given an Incumbent Any (Measurable) Advantages in Federal Computer Procurement?," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 19-39, Spring. [Downloadable!] (restricted)
  9. Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Blackwell Publishing, vol. 40(1), pages 55-83, March. [Downloadable!] (restricted)
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