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Snowball: A dynamic oligopoly model with indirect network effects, Journal of Economic Dynamics and Control

Abstract

Allowing for innovation dynamics in the software market, this paper studies the conditions under which standardization in the hardware market arises and persists over time. In the model, software firms repeatedly invest in quality upgrades, compete in the product market, and make exit as well as entry decisions. The results show that, in general, excess inertia does not occur. A platform becomes the standard in a market only if it is better than the competing platforms. Furthermore, low overall rates of innovation always lead to variety; conversely, the higher the speed of innovation, the more likely standardization is.

Type

Article

Author(s)

Sarit Markovich

Date Published

2008

Citations

Markovich, Sarit. 2008. Snowball: A dynamic oligopoly model with indirect network effects. Journal of Economic Dynamics and Control. 32(3): 909-938.

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