Numerical Example

For a specific configuration of parameters, HW will see 10% of potential users adopt the new system under any of the following combinations of

• price of new systems hardware,
• installed base of new system users, and
• portion of content for the new system:

In this example ten percent of potential adopters will adopt the new system:

• when the price of new systems hardware is $250, AND
• 1% of potential users have already adopted the system, AND
• 9% of content is made available for the new system (with 71% available for the older system).

Alternatively, if only 1% of potential users have adopted the new system, but there is more content available, say 45%, then the same portion of potential users will adopt, 10%, but with more content available, the value of the system to users is higher.  In this case,they will be willing to pay $350 for the systems hardware, rather than $250 when only 29% of content is available.

The table illustrates that, for hardware-software technology systems, users are willing to pay higher prices for systems hardware, when either there is a larger installed base of users for the system and/or there is more content available.  On the flip side, adopters will not adopt new hardware-software technology systems at prices that are profitable for systems providers, unless or until there is either a sufficient large installed base of users and/or there is a sufficient amount of content available for the new system.