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“Lock-In and Unobserved Preferences in Server Operating System Adoption: A Case of Linux vs. Windows"

This paper attempts to distinguish state dependence (or lock-in) from unobserved preferences in the decision to adopt Linux or Windows as the operating system for computer servers. To this end, we use detailed survey data of over 100,000 establishments in the United States. Without accounting for unobserved heterogeneity in establishment-specific preferences for operating systems, we find a strong positive correlation between the current choice and the previous choice, suggesting potentially high switching costs and lock-in. To account for unobserved preferences for either operating system, we impose weak identifying assumptions and employ recently developed dynamic discrete choice panel data methods (Arellano and Carrasco 2003). The results show little or no evidence of state dependence, implying that unobserved preferences, rather than switching costs and lock-in, are more important factors in the adoption decision. Once taste heterogeneity is taken into account, we additionally find little evidence of network effects between server operating systems and non-server operating systems.

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File URL: http://www.netinst.org/Hong-Rezende_07-05.pdf
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Paper provided by NET Institute in its series Working Papers with number 07-05.

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Length: 35 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:net:wpaper:0705
Contact details of provider: Web page: http://www.NETinst.org/

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  1. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
  2. Arellano, M & Carrasco, R, 1996. "Binary Choice Panel Data Models with Predetermined Variables," Papers 9618, Centro de Estudios Monetarios Y Financieros-.
  3. Bo E. Honoré & Ekaterini Kyriazidou, 2000. "Panel Data Discrete Choice Models with Lagged Dependent Variables," Econometrica, Econometric Society, vol. 68(4), pages 839-874, July.
  4. 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.
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