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The role of prices and network effects in the growth of the iPhone platform

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  • Garcia-Swartz, Daniel D.
  • Muhamedagić, Mensur
  • Saenz, Diana

Abstract

In this paper we examine the roles played by prices, direct network effects, and indirect network effects in driving the growth of devices and apps on the iPhone platform. With long time series of high-frequency data, we estimate several econometric models and conduct various sensitivity exercises. Unlike prior studies on the subject, we model direct network effects in an explicit manner. The key conclusions we draw are: first, the three dimensions of the platform (prices, direct network effects, and indirect network effects) have had an impact in terms of encouraging the growth of iPhones and apps; and second, on the devices side, direct network effects and prices have been more important than indirect network effects, whereas on the apps side, indirect network effects have had a relatively stronger impact. In short, the impact of phones on apps has been relatively more substantial than the impact of apps on phones.

Suggested Citation

  • Garcia-Swartz, Daniel D. & Muhamedagić, Mensur & Saenz, Diana, 2019. "The role of prices and network effects in the growth of the iPhone platform," Technological Forecasting and Social Change, Elsevier, vol. 147(C), pages 110-122.
    • Handle: RePEc:eee:tefoso:v:147:y:2019:i:c:p:110-122
    DOI: 10.1016/j.techfore.2019.06.020
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    1. Knudsen, Eirik Sjåholm & Belik, Ivan, 2023. "The Achilles heel of interconnected user networks: Network firms and the vulnerability of rapid decline," Technological Forecasting and Social Change, Elsevier, vol. 195(C).

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