Mara Lederman

Software Exclusivity and the Scope of Indirect Network Effects in the U.S. Home Video Game Market

This paper investigates the scope of indirect network effects in the home video game industry. We argue that the increasing prevalence of non-exclusive software gives rise to indirect network effects that exist between users of competing and incompatible hardware platforms. This is because software non-exclusivity, like hardware compatibility, allows a software firm to sell to a market broader than a single platforms installed base. We look for evidence of market-wide network effects by estimating a model of hardware demand and software supply. Our software supply equation allows the supply of games for a particular platform to depend not only on the installed base of that platform, but also on the installed base of competing platforms. Our results indicate the presence of both a platform-specific network effect and--in recent years--a cross-platform (or generation-wide) network effect. Our finding that the scope of indirect network effects in this industry has widened suggests one reason that this market, which is often cited as a canonical example of one with strong indirect network effects, is no longer dominated by a single platform.

Exit, Tweets and Loyalty

Hirschman’s Exit, Voice, and Loyalty highlights the role of “voice” in disciplining firms for low quality. We develop a formal model of voice as a relational contact between firms and consumers and show that voice is more likely to emerge in concentrated markets. We test this model using data on tweets to major U.S. airlines. We find that tweet volume increases when quality – measured by on-time performance – deteriorates, especially when the airline operates a large share of the flights in a market. We also find that airlines are more likely to respond to tweets from consumers in such markets.

Do Airlines Pad Their Schedules

Abstract We analyze how schedule times, actual flight times and on-time performance have changed in the U.S. airline industry between 1990 and 2016. We find schedule times have increased in most years, with the largest increases after 2008. Actual flight times and total travel times have also increased but by less than schedule times and the gap has grown over time. This has resulted in reduced arrival delays even though flights are, in fact, taking longer to complete. We discuss the implications of these findings for quality provision and information disclosure within the airline industry.