NET Institute Working Paper #08-40, November 2008
This paper examines the market for LCD televisions to cleanly identify existing and future network externalities.
The average American is projected to spend 1,704 hours (71 days) watching television in 2008. This paper addresses how this monster market is evolving and the important network effects resultant of the evolution.
To estimate network effects this paper builds a hedonic pricing model by collecting price, image tuner and quality, and product compatibility characteristics from CNet’s Shopper.com.
Given that today’s televisions are designed to be multimedia entertainment centers, connectivity to other compatible devices is another source of indirect network externalities present as a result of the evolving market.