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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 ()
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Matthew T. Clements: University of Texas

No 04-01, Working Papers from NET Institute

Abstract: This paper examines 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. The paper also finds 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.

Keywords: indirect network effects; penetration pricing; software variety (search for similar items in EconPapers)
JEL-codes: C23 L68 M21 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-10, Revised 2004-10
New Economics Papers: this item is included in nep-com, nep-ict, nep-ino, nep-net and nep-tid
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http://www.netinst.org/Clements_Ohashi.pdf (application/pdf)
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Related works:
Journal Article: INDIRECT NETWORK EFFECTS AND THE PRODUCT CYCLE: VIDEO GAMES IN THE U.S., 1994–2002* (2005) Downloads
Working Paper: Indirect Network Effects and the Product Cycle: Video Games in the U.S., 1994-2002 (2004) Downloads
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