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Empirically Testing for Indirect Network Externalities in the LCD

Authors: Livingston, Jeffrey - Bentley University
Ortmeyer, David - Bentley University
Scholten, Patrick - Bentley University
Wong, Wilson - Bentley University
Keywords: HDTV, Internet, Connectivity, Compatibility, Indirect Network Externalities
Issue Date: 2008
Series/Report no.: Net Institute Working Paper;08-40
Abstract: 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 required to have an ATSC digital tuner install on all new televisions has created an indirect network effect whereby television that are backward compatible with the NTSC analog QAM and VSB‐8 systems have short‐run value. Over time, however, we argue that the ATSC digital tuner will become more valuable. The second indirect network effect we estimate stems from the number and types of ports available on LCD televisions. In each case, we find statistically significant evidence for the presence of indirect network effects in the market for LCD televisions.
Appears in Collections:NET Institute Working Papers Series

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