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INDIRECT NETWORK EFFECTS AND THE PRODUCT CYCLE: VIDEO GAMES IN THE U.S., 1994–2002*

Matthew T. Clements and Hiroshi Ohashi ()

Journal of Industrial Economics, 2005, vol. 53, issue 4, 515-542

Abstract: We examine the importance of indirect network effects in the U.S. video game market between 1994 and 2002. The diffusion of game systems is analyzed by the interaction between console adoption decisions and software supply decisions. Estimation results suggest that introductory pricing is an effective practice at the beginning of the product cycle, and expanding software variety becomes more effective later. We also find a degree of inertia in the software market that does not exist in the hardware market. This observation implies that software providers continue to exploit the installed base of hardware users after hardware demand has slowed.

Date: 2005
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https://doi.org/10.1111/j.1467-6451.2005.00268.x

Related works:
Working Paper: Indirect Network Effects and the Product Cycle: Video Games in the U.S., 1994-2002 (2004) Downloads
Working Paper: Indirect Network Effects and the Product Cycle: Video Games in the U.S., 1994-2002 (2004) Downloads
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Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

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