Diffusion of a new product under network effects: the U.S. DVD market

İnceoğlu, Fırat and Park, Minsoo (2010) Diffusion of a new product under network effects: the U.S. DVD market. (Accepted/In Press)

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We formulate a model that captures the inter-dependence between hardware demand and software supply –indirect network effect - in the DVD industry. The identification of the network effect comes from the difference in software availability across two different formats: VHS and DVD. We find that a 1% increase in the number of DVD titles raises the demand for DVD players by 0.87%. Simultaneously, a 1% increase in video player ownership leads to a 0.16% increase in the variety of video titles. Our simulations show that hardware manufacturers might be able to internalize the network externality to increase total industry revenues.

Item Type:Article
Uncontrolled Keywords:Network effects; DVD; Discrete Choice Models
Subjects:H Social Sciences > HB Economic Theory > HB135-147 Mathematical economics. Quantitative methods
H Social Sciences > HD Industries. Land use. Labor > HD0045-45.2 Technological innovations
ID Code:14671
Deposited By:Fırat İnceoğlu
Deposited On:05 Oct 2010 09:34
Last Modified:31 Jul 2019 10:44

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