Technological change in markets with network externalities

Paul W.J. De Bijl; Sanjeev Goyal

doi:10.1016/0167-7187(94)00457-D

Technological change in markets with network externalities

Paul W.J. De Bijl, Sanjeev Goyal

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

This paper examines a duopoly model in which firms have to decide simultaneously on product innovation and compatibility of the successor technologies with the established industry standard. We show that in markets with homogeneous consumers there may be a bias towards a new standard (excess momentum), despite the presence of network externalities and an installed base. In markets with heterogeneous consumers, sufficient conditions for the coexistence of two incompatible networks are derived and it is shown that both excess momentum and excess inertia are possible.

Original language	English (US)
Pages (from-to)	307-325
Number of pages	19
Journal	International Journal of Industrial Organization
Volume	13
Issue number	3
DOIs	https://doi.org/10.1016/0167-7187(94)00457-D
State	Published - Sep 1995

Keywords

Competition
Network externalities
Technological change

ASJC Scopus subject areas

Industrial relations
Aerospace Engineering
Economics and Econometrics
Economics, Econometrics and Finance (miscellaneous)
Strategy and Management
Industrial and Manufacturing Engineering

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10.1016/0167-7187(94)00457-D

Cite this

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AB - This paper examines a duopoly model in which firms have to decide simultaneously on product innovation and compatibility of the successor technologies with the established industry standard. We show that in markets with homogeneous consumers there may be a bias towards a new standard (excess momentum), despite the presence of network externalities and an installed base. In markets with heterogeneous consumers, sufficient conditions for the coexistence of two incompatible networks are derived and it is shown that both excess momentum and excess inertia are possible.

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Technological change in markets with network externalities

Abstract

Keywords

ASJC Scopus subject areas

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