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The DVD Versus DIVX Standard War: Empirical Evidence of Network Effects and Preannouncement Effects


  • Dranove, David
  • Gandal, Neil


In this Paper, we empirically test for network effects and preannouncement effects in the DVD market. We do this by measuring the effect of potential (incompatible) competition on a network undergoing growth. We find that there are network effects. The data is generally consistent with the hypothesis that the preannouncement of DIVX temporarily slowed down the adoption of DVD technology.

Suggested Citation

  • Dranove, David & Gandal, Neil, 2002. "The DVD Versus DIVX Standard War: Empirical Evidence of Network Effects and Preannouncement Effects," CEPR Discussion Papers 3634, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3634

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    References listed on IDEAS

    1. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    2. Dranove, David & Gandal, Neil, 2000. "The DVD vs. DIVX Standard War: Empirical Evidence of Vaporware," Department of Economics, Working Paper Series qt0979867q, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    3. Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 85-103, March.
    4. Gandal, Neil & Greenstein, Shane & Salant, David, 1999. "Adoptions and Orphans in the Early Microcomputer Market," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 87-105, March.
    5. Farrell, Joseph & Saloner, Garth, 1986. "Standardization and variety," Economics Letters, Elsevier, vol. 20(1), pages 71-74.
    6. Erik Brynjolfsson & Chris F. Kemerer, 1996. "Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market," Management Science, INFORMS, vol. 42(12), pages 1627-1647, December.
    7. Joseph Farrell & Garth Saloner, 1985. "Installed Base and Compatibility With Implications for Product Preannouncements," Working papers 385, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Chou, Chien-fu & Shy, Oz, 1990. "Network effects without network externalities," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 259-270, June.
    9. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
    10. Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
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    More about this item


    network effects; product preannouncements; standards;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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