HEDONIC PRICE INDEXES FOR SPREADSHEETS AND AN EMPIRICAL-TEST FOR NETWORK EXTERNALITIES

In this article, I first estimate hedonic price equations for computer spreadsheet programs, and then use the analysis to empirically test whether network externalities exist in this industry. The study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the Lotus platform and for spreadsheets that offer links to external databases, and a smaller premium for spreadsheets that offer local area network compatibility. These results support the hypothesis that the computer spreadsheet market exhibits network externalities. Finally, the quality-adjusted (real) price of computer spreadsheets declined by approximately 15% per year from 1986 to 1991.