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Empirically Testing for Indirect Network Externalities in the LCD Television Market

Author

Listed:
  • Patrick A. Scholten

    () (Bentley University)

  • Jeffrey A. Livingston

    () (Bentley University)

  • David Ortmeyer

    () (Bentley University)

  • Wilson Wong

    () (Bentley University)

Abstract

This paper examines price data on over 222 LCD televisions to estimate indirect network effects arising from two sources. First, we conjecture that the disconnect between the timing of when broadcasters are required to convert to an only digital-signal world and when television manufacturers were required to have an ATSC digital tuner install on all new televisions has created an indirect network effect whereby television that are backward compatible with the analog QAM and VSB-8 systems have short-run value. Over time, however, we argue that the ATSC digital tuner will become more valuable. The second indirect network effect we estimate stems from the number and types of ports available on LCD televisions. In each case, we find statistically significant evidence for the presence of indirect network effects in the market for LCD televisions.

Suggested Citation

  • Patrick A. Scholten & Jeffrey A. Livingston & David Ortmeyer & Wilson Wong, 2008. "Empirically Testing for Indirect Network Externalities in the LCD Television Market," Working Papers 08-40, NET Institute, revised Nov 2008.
  • Handle: RePEc:net:wpaper:0840
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    File URL: http://www.netinst.org/Scholten_Livingston_Ortmeyer_Wong_08-40.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    HDTV; Internet; Connectivity; Compatibility; Indirect Network Externalities;

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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