Competition, Inertia, and Network Effects
33 Pages Posted: 13 Sep 2005
Date Written: April 2005
Abstract
We analyze a simple game of technology adoption with network effects and multiple new technologies. Potential adopters can adopt early, late, or not at all. We show that one of the reasons for the failure of new technologies can be the presence of multiple incompatible variants of that technology. An adopter's individual incentives to adopt are lower with multiple technologies than with one. Turning to aggregate expected welfare, however, we find that two active technologies may be welfare-improving.
Keywords: Technology Adoption, Network Externalities, Installed Base
JEL Classification: L1, O3
Suggested Citation: Suggested Citation
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