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Competition, Inertia, and Network Effects

Authors/Editors: Kretschmer, T.
Published: 2005
Type: Working Papers
Published by: SSRN


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.

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