The Effect Of Java On Network Benefits In Computer Software Markets

Abstract

In markets that exhibit network effects it is often believed that society gets inefficiently locked into an inferior technology. This paper utilizes data generated by a natural experiment, afforded by the introduction of the programming language Java, to test whether computer software markets are prone to inefficient lock-in. Findings from a hedonic price regression indicate that Java effectively increased the level of competition in the software applications market and lowered prices of applications software. The regression results are not consistent with the hypothesis of inefficient lock-in.