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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: Sauder School of Business, University of British Columbia and Department of Economics, University of Texas

No CIRJE-F-261, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

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.

Pages: 34 pages
Date: 2004-02
New Economics Papers: this item is included in nep-com, nep-ino, nep-mac, nep-net and nep-tid
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http://www.cirje.e.u-tokyo.ac.jp/research/dp/2004/2004cf261.pdf (application/pdf)

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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