Is there a market for work group servers? Evaluating market level demand elasticities using micro and macro models
This paper contains an empirical analysis demand for â€œwork-groupâ€ (or low-end) servers. Servers are at the centre of many US and EU anti-trust debates, including the Hewlett-Packard/Compaq merger and investigations into the activities of Microsoft. One question in these policy decisions is whether a high share of work servers indicates anything about shortrun market power. To investigate price elasticities we use model-level panel data on transaction prices, sales and characteristics of practically every server in the world. We contrast estimates from the traditional â€œmacroâ€ approaches that aggregate across brands and modern â€œmicroâ€ approaches that use brand-level information (including both â€œdistance metricâ€ and logit based approaches). We find that the macro approaches lead to overestimates of consumer price sensitivity. Our preferred micro-based estimates of the market level elasticity of demand for work group servers are around 0.3 to 0.6 (compared to 1 to 1.3 in the macro estimates). Even at the higher range of the estimates, however, we find that demand elasticities are sufficiently low to imply a distinct â€œanti-trustâ€ market for work group servers and their operating systems. It is unsurprising that firms with large shares of work group servers have come under some antitrust scrutiny.
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- Shane Greenstein, 1994.
"From Superminis to Supercomputers: Estimating Surplus in the Computing Market,"
NBER Working Papers
4899, National Bureau of Economic Research, Inc.
- Shane M. Greenstein, 1996. "From Superminis to Supercomputers: Estimating Surplus in the Computing Market," NBER Chapters, in: The Economics of New Goods, pages 329-372 National Bureau of Economic Research, Inc.
- Jerome Foncel & Marc Ivaldi, 2005. "Operating System Prices In The Home Pc Market," Journal of Industrial Economics, Wiley Blackwell, vol. 53(2), pages 265-297, 06.
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