This paper investigates how switching costs affect product compatibility and market dynamics in network industries. A reduction in the switching cost makes the firms' products more attractive relative to the outside good, which diminishes the market expansion benefit of making products...

Positive network externalities can arise when consumers benefit from the consumption of compatible products by other consumers (user-positive consumption externalities) or, alternatively, when they incur costs from the consumption of incompatible products by other consumers (nonuser-negative...

In this study we examine the antecedents of small independent software vendor (ISV) decisions to join a platform ecosystem. Using data on the history of partnering activities from 1201 ISVs from 1996 to 2004, we find that appropriability strategies based on intellectual property rights and the...

This paper provides a theory of quot;family network,quot; in contrast to quot;local externalities,quot; to explain the geographic concentration of industry. For many industries, one most important source of entrants is spinoffs, who typically locate near parent firms and benefit from knowledge...

This paper examines price data on over 222 LCD televisions to estimate indirect network effects arising from two sources. First, we conjecture that the disconnect between the timing of when broadcasters are required to convert to an only-digital-signal world and when television manufacturers are...

The concept of a 'global digital divide' is now common, and many cross-country studies of determinants of differences in computer and Internet penetration have been performed. The main conclusions and policy implications from these studies are relatively blunt: get richer, have more telephones,...

The idea of a 'global digital divide' is well accepted, and cross-country studies of determinants of differences in computer and Internet penetration have identified income, telecommunications infrastructure, and regulatory quality as key influencing factors. The policy implications from these...

We examine the profitability and welfare implications of targeted price discrimination in two-sided markets. First, we show that equilibrium discriminatory prices exhibit novel features relative to discriminatory prices in one-sided models and uniform prices in two-sided models. Second, we...

We develop a model of dynamic platform formation under positive platform externalities. Users can switch between an incumbent and entrant platforms, switching opportunities arise stochastically and users can choose whether to accept or reject an opportunity to switch. For homogeneous users, we...

This paper evaluates whether competition hinders or spurs investment in a network industry. When a network is split between competitors, potential network effects are foregone. However, a firm may invest in components that are not shared, to steal customers from its competitors. I structurally...