Product Emulation Strategies in The Presence of Reputation Effects And Network Externalities: Some Evidence From The Minicomputer Industry

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Abstract
A model of firm performance in the minicomputer industry is developed and estimated. We use an hedonic price formulation to analyze product design and pricing issues and a market share model to assess the demand effects of price-performance characteristics, installed base advantages and manufacturer reputation. The results, which are based on 1976–1983 data, demonstrate the importance of network externalities, price-performance competition and reputation. We utilize the estimated models to quantify the implications of several emulation strategies and several defensive strategies of incumbent manufacturers.