Adoption of Superior Technology in Markets with Heterogeneous Network Externalities and Price Competition
2000-10-23
Research Paper
| Related Files |
|---|
View PDF Version
(2000-0871.pdf, 0.2MB) |
In this paper we investigate whether markets with heterogeneous network externalities can be locked-in by old technologies even if superior technologies are available. Heterogeneous network externalities are present when some consumers care more about the size of the market share of a good than others. Interestingly, the answer depends on the quality difference between the old and the new technology and on whether firms compete in prices. Without price competition, a partial lock-in occurs if (and only if) the quality difference is small. In the presence of price competition, lock-in in the traditional sense completely disappears, although the old technology may keep some market share in some periods as the new technology is priced higher in equilibrium.
- L13 : Oligopoly and Other Imperfect Markets
- D43 : Oligopoly and Other Forms of Market Imperfection
- L1 : Market Structure, Firm Strategy, and Market Performance
- market
- equilibrium
- market share
- technology
- price
- share
- entrant
- profit
- quality
- consumer
- strategy
- price competition
- p t 0
- network externalities
- quality difference
- period
- network
- welfare
- value
- difference
