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Lock-in and unobserved preferences in server operating systems: A case of Linux vs. Windows

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  • Hong, Seung-Hyun
  • Rezende, Leonardo

Abstract

This paper investigates to what extent the persistence of Microsoft Windows in the market for server operating systems is due to lock-in or unobserved preferences. While the hypothesis of lock-in plays an important role in the antitrust policy debate for the operating systems market, it has not been extensively documented empirically. To account for unobserved preferences, we use a panel data identification approach based on time-variant group fixed effects, and estimate the dynamic discrete choice panel data model developed by Arellano and Carrasco (2003). Using detailed establishment-level data, we find that once we account for unobserved preferences, the estimated magnitudes of lock-in are considerably smaller than those from the conventional approaches, suggesting that unobserved preferences play a major role in the persistence of Windows. Further robustness checks are consistent with our findings.

Suggested Citation

  • Hong, Seung-Hyun & Rezende, Leonardo, 2012. "Lock-in and unobserved preferences in server operating systems: A case of Linux vs. Windows," Journal of Econometrics, Elsevier, vol. 167(2), pages 494-503.
  • Handle: RePEc:eee:econom:v:167:y:2012:i:2:p:494-503
    DOI: 10.1016/j.jeconom.2011.09.031
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    References listed on IDEAS

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    More about this item

    Keywords

    Lock-in; Unobserved preference; Panel data; Discrete choice; Fixed effects; Random effects;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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