Abstract
Network economics suggests consumer willingness to adopt Internet services is an increasing function of the size of the network. The existence of network externalities in a dynamic setting increases the speed at which market demand grows in the presence of a downward trend for industry marginal cost. Given the possible existence of a network externality for Internet services and e-commerce, estimates of the size of the network effect are critical for forecasting demand. A model proposed by Economides and Himmelberg (1995) is adapted to a dynamic disequilibrium setting to describe the global Internet market. The model is estimated on cross-country panel data to yield a direct measure of the network effect. Due to the possibility of endogeneity, various instrumental variables to assess the robustness of the estimates are utilised.
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Madden, G., Coble-Neal, G. (2002). Internet Forecasting and the Economics of Networks. In: Loomis, D.G., Taylor, L.D. (eds) Forecasting the Internet. Topics in Regulatory Economics and Policy Series, vol 39. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-0861-8_8
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DOI: https://doi.org/10.1007/978-1-4615-0861-8_8
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