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Hedonic price indexes for spreadsheets and an empirical test of the network externalities hypothesis

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  • Neil Gandal

    (Tel Aviv University)

Abstract

In this paper, I first estimate hedonic price equations for computer spreadsheet programs, and then use the analysis to empirically test whether network externalities exist in this industry. The study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the Lotus platform and for spreadsheets that offer links to external data bases, and a smaller premium for spreadsheets that offer local area network compatibility. These results support the hypothesis that the computer spreadsheet market exhibits network externalities. Finally, the quality-adjusted (real) price index of computer spreadsheets declined by approximately 15 percent per year from 1986-1991.

Suggested Citation

  • Neil Gandal, 1993. "Hedonic price indexes for spreadsheets and an empirical test of the network externalities hypothesis," Industrial Organization 9309002, EconWPA.
  • Handle: RePEc:wpa:wuwpio:9309002
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    References listed on IDEAS

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    1. Ernst R. Berndt & Zvi Griliches, 1993. "Price Indexes for Microcomputers: An Exploratory Study," NBER Chapters,in: Price Measurements and Their Uses, pages 63-100 National Bureau of Economic Research, Inc.
    2. Gandal, N., 1992. "Hedonic Price Indexes for Spreadsheets and an Empirical Test of the Network Externalities Hypothesis," Papers 18-92, Tel Aviv.
    3. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    4. Church, Jeffrey & Gandal, Neil, 1993. "Complementary network externalities and technological adoption," International Journal of Industrial Organization, Elsevier, vol. 11(2), pages 239-260, June.
    5. Gilbert, Richard J, 1992. "Symposium on Compatibility: Incentives and Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 1-8, March.
    6. Robert J. Gordon, 1987. "The Postwar Evolution of Computer Prices," NBER Working Papers 2227, National Bureau of Economic Research, Inc.
    7. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-479, April.
    8. 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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    1. Gandal, N., 1992. "Hedonic Price Indexes for Spreadsheets and an Empirical Test of the Network Externalities Hypothesis," Papers 18-92, Tel Aviv.

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    • L - Industrial Organization

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