Empirically Testing for Indirect Network Externalities in the LCD Television Market

Patrick A. Scholten (), Jeffrey Livingston (), David Ortmeyer () and Wilson Wong ()
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Patrick A. Scholten: Bentley University, http://www.nash-equilibrium.com
David Ortmeyer: Bentley University
Wilson Wong: Bentley University

No 08-40, Working Papers from NET Institute

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.

Keywords: HDTV; Internet; Connectivity; Compatibility; Indirect Network Externalities (search for similar items in EconPapers)
JEL-codes: L81 L86 M21 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2008-11, Revised 2008-11
New Economics Papers: this item is included in nep-cul, nep-ind and nep-net
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