Network Goods (Empirical Studies)
A network effect exists if the consumption benefits of a good or service increase with the total number of consumers who purchase compatible products. A growing empirical literature examines technological adoption of products with network effects. The early literature mainly addressed the question of whether network effects are indeed significant; this work typically employed reduced form models. Later literature employed structural methodology, which can address aspects of firm strategy, such as incentives to provide compatible products. Key issues in the empirical work on network industries are examined.
KeywordsHedonic prices Logit models of individual choice Network effect (empirical studies) Product differentiation
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