Resource title

Price Indexes for PC Database Software and the Value of Code Compatibility

Resource image

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Resource description

Changing product quality poses a challenge for the computation of price indexes, in particular in technologically advanced industries. We assess the differences between traditional and quality-corrected indexes by computing hedonic and matched-model price indexes for personal computer database software. Our database covers the price development in Germany from 1986 to 1994. Quality-adjusted software prices decline by 7.4 percent according to our hedonic index. Surprisingly, a matchedmodel index based on linking the prices of directly comparable program versions decreases even faster than the hedonic index (9.3 percent). This unusual result is apparently caused by the simultaneous selling of old and new versions of a given software product. The estimation results also confirm the importance of network effects. Code compatibility, i.e. the capability of executing programs written for the dominant database product, yields a significant price premium. The ability to read and write data in the dominant spreadsheet format (file compatibility) is also associated with higher prices, but the price differential is much smaller than in the case of code compatibility.

Resource author

Dietmar Harhoff, Dietmar Moch

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/24689

Resource license

Adapt according to the presented license agreement and reference the original author.