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Title: NETWORK EXTERNALITIES AND THE INTERNET Running title: Internet Network Externalities

By Russel Cooper

Abstract

*Corresponding author. The authors would like to thank James Alleman for helpful comments. Assistance by Grant Coble-Neal and data collection by Michael Schipp are gratefully acknowledged. The usual disclaimer applies. Network Externalities and the Internet A driving force behind the emergence of the “new ” or information economy is the growth of Internet network capacity. A fundamental problem in mapping this dynamic is the lack of an acceptable theoretical framework through which to direct empirical investigations. Most of the models in the literature on network externalities have been developed in a static framework, with externalities viewed as instantaneous or self-fulfilling. The model specified here builds on received theory from several sources to include these features and develops a model that is both capable of econometric estimation and which provides as an output a direct measure of the network effect. Accordingly, the main goal of this paper is to find the magnitude of the external effect on Internet network growth. In addition, this paper illustrates the ability of panel data to generate estimates of structural parameters capable of explaining Internet host growth. INTERNET NETWORK EXTERNALITIES 2 I

Year: 2011
OAI identifier: oai:CiteSeerX.psu:10.1.1.197.2600
Provided by: CiteSeerX
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