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OPERATING SYSTEM PRICES IN THE HOME PC MARKET *
Author(s) -
Foncel Jerome,
Ivaldi Marc
Publication year - 2005
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.0022-1821.2005.00254.x
Subject(s) - price elasticity of demand , elasticity (physics) , economics , assertion , market demand schedule , derived demand , profit (economics) , aggregate demand , demand curve , panel data , microeconomics , on demand , econometrics , monetary economics , commerce , computer science , monetary policy , materials science , composite material , programming language
Because the demand for OS is a derived demand revealed through the demand for PCs and because its elasticity is relatively small, the profit‐maximizing price of DOS/WIN that would result from a static equilibrium is much higher than the observed price. We investigate this assertion empirically by fitting a differentiated‐products model of the home PC market to panel data of all PC brands sold in the G7 countries over the period 1995–1999. The results confirm that the low value of the aggregate elasticity of demand for PCs is the result of differentiation and substitution among PCs.