Snowball: A dynamic oligopoly model with indirect network effects

Sarit Markovich*

*Corresponding author for this work

Research output: Contribution to journalArticle

26 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)909-938
Number of pages30
JournalJournal of Economic Dynamics and Control
Volume32
Issue number3
DOIs
StatePublished - Mar 1 2008

Keywords

  • Dynamics
  • Market structure
  • Network effects
  • Oligopoly

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics

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