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Estimating the Costs of Standardization: Evidence from the Movie Industry

El Hadi Caoui

No 8040, CESifo Working Paper Series from CESifo

Abstract: This paper studies the decentralized adoption of a technology standard when network effects are present. If the new standard is incompatible with the current installed base, adoption may be inefficiently delayed. I quantify the magnitude of “excess inertia” in the switch of the movie distribution and exhibition industries from 35mm film to digital. I specify and estimate a dynamic game of digital hardware adoption by theaters and digital movies supply by distributors. Counterfactual simulations establish that excess inertia reduces surplus by 19% relative to the first-best adoption path; network externalities explain 29% of the surplus loss.

Keywords: technology adoption; network effects; movie industry (search for similar items in EconPapers)
JEL-codes: L82 L86 O33 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-com, nep-cul, nep-ind and nep-pay
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