Discussion Paper
This work is distributed as a Discussion Paper by the STANFORD INSTITUTE FOR ECONOMIC POLICY RESEARCH
SIEPR Discussion Paper No. 00-51 Network Effects and Microsoft Timothy F. Bresnahan Stanford University
August 2001
Stanford Institute for Economic Policy Research Stanford University Stanford, CA 94305 (650) 725-1874
The Stanford Institute for Economic Policy Research at Stanford University supports research bearing on economic and public policy issues. The SIEPR Discussion Paper Series reports on research and policy analysis conducted by researchers affiliated with the Institute. Working papers in this series reflect the views of the authors and not necessarily those of the Stanford Institute for Economic Policy Research or Stanford University. ____________
Network Effects and Microsoft
Timothy F. Bresnahan* Abstract
Economic theories of network effects have a number of testable implications. Testing of the theory by econometric methods, however, has proved difficult. I turn to documentary methods in order to test the theory, drawing on the body of documents used as evidence in U.S. vs. Microsoft. Analysis strikingly similar to the theory, including not only the main implications but also key analytical distinctions, guides business decision making. The same analysis suggests several interesting areas in which the theory is incomplete. Document based research raises a number of novel methodological issues.
Professor of Economics, Stanford University, and Gordon and Betty Moore Senior Fellow, Stanford Institute for Economic Policy Research. Email address: tbres@leland.stanford.edu. I am grateful to several people for comments, but especially to Jacques CrJmer. While I served in the Antitrust Division of the United States Department of Justice and continue, at this writing, to consult to the Division, this paper does not represent the opinion or policy position of the Division but only my own view.
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Network Effects and
SIEPR Discussion Paper No. 00-51 Network Effects and Microsoft Timothy F. Bresnahan Stanford University
August 2001
Stanford Institute for Economic Policy Research Stanford University Stanford, CA 94305 (650) 725-1874
The Stanford Institute for Economic Policy Research at Stanford University supports research bearing on economic and public policy issues. The SIEPR Discussion Paper Series reports on research and policy analysis conducted by researchers affiliated with the Institute. Working papers in this series reflect the views of the authors and not necessarily those of the Stanford Institute for Economic Policy Research or Stanford University. ____________
Network Effects and Microsoft
Timothy F. Bresnahan* Abstract
Economic theories of network effects have a number of testable implications. Testing of the theory by econometric methods, however, has proved difficult. I turn to documentary methods in order to test the theory, drawing on the body of documents used as evidence in U.S. vs. Microsoft. Analysis strikingly similar to the theory, including not only the main implications but also key analytical distinctions, guides business decision making. The same analysis suggests several interesting areas in which the theory is incomplete. Document based research raises a number of novel methodological issues.
Professor of Economics, Stanford University, and Gordon and Betty Moore Senior Fellow, Stanford Institute for Economic Policy Research. Email address: tbres@leland.stanford.edu. I am grateful to several people for comments, but especially to Jacques CrJmer. While I served in the Antitrust Division of the United States Department of Justice and continue, at this writing, to consult to the Division, this paper does not represent the opinion or policy position of the Division but only my own view.
*
Page 2
Network Effects and
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