Lock-in and unobserved preferences in server operating systems: A case of Linux vs. Windows

Seung-Hyun Hong and Leonardo Rezende

Journal of Econometrics, 2012, vol. 167, issue 2, 494-503

Abstract: This paper investigates to what extent the persistence of Microsoft Windows in the market for server operating systems is due to lock-in or unobserved preferences. While the hypothesis of lock-in plays an important role in the antitrust policy debate for the operating systems market, it has not been extensively documented empirically. To account for unobserved preferences, we use a panel data identification approach based on time-variant group fixed effects, and estimate the dynamic discrete choice panel data model developed by Arellano and Carrasco (2003). Using detailed establishment-level data, we find that once we account for unobserved preferences, the estimated magnitudes of lock-in are considerably smaller than those from the conventional approaches, suggesting that unobserved preferences play a major role in the persistence of Windows. Further robustness checks are consistent with our findings.

Keywords: Lock-in; Unobserved preference; Panel data; Discrete choice; Fixed effects; Random effects (search for similar items in EconPapers)
JEL-codes: C23 L15 L17 L86 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:167:y:2012:i:2:p:494-503

DOI: 10.1016/j.jeconom.2011.09.031

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