Technological change in markets with network externalities

Paul W.J. De Bijl, Sanjeev Goyal

Research output: Contribution to journalArticlepeer-review


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 languageEnglish (US)
Pages (from-to)307-325
Number of pages19
JournalInternational Journal of Industrial Organization
Issue number3
StatePublished - Sep 1995


  • 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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