Network Effects and Microsoft

Economic theories of network effects have a number of testable implications. Testing of the theory by econometric methods, however, has proved difficult. I turn to documentary methods in order to test the theory, drawing on the body of documents used as evidence in U.S. vs. Microsoft. Analysis strikingly similar to the theory, including not only the main implications but also key analytical distinctions, guides business decision making. The same analysis suggests several interesting areas in which the theory is incomplete. Document based research raises a number of novel methodological issues.