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The Provision of (Two-Way) Converters in the Transition Process to a New Incompatible Technology

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Choi, Jay Pil

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Abstract

This paper analyzes the dynamic provision of converters in the transition process between two incompatible technologies. The author derives the equilibrium behavior in the provision of converters and compares it to the socially optimal outcome. He finds that there can be two types of market inefficiency in the provision of converters. First, converters can be supplied by the 'wrong' group. Second, the timing of provision may be too late since the providers of converters ignore the positive externality that their provision would confer on the users of the rival technology. Copyright 1997 by Blackwell Publishing Ltd

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Article provided by Blackwell Publishing in its journal Journal of Industrial Economics.

Volume (Year): 45 (1997)
Issue (Month): 2 (June)
Pages: 139-53
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Handle: RePEc:bla:jindec:v:45:y:1997:i:2:p:139-53

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  1. Mikhail Klimenko & Kamal Saggi, 2004. "Technical Compatibility and the Mode of Foreign Entry under Network Externalities," Working Papers 04-05, NET Institute, revised Oct 2004. [Downloadable!]
  2. Pollock, Rufus, 2005. "The Control of Porting in Two-Sided Markets," MPRA Paper 5023, University Library of Munich, Germany, revised Jun 2007. [Downloadable!]
    Other versions:
  3. Jiawei Chen & Ulrich Doraszelski & Joseph E. Harrington, Jr., 2008. "Avoiding Market Dominance: Product Compatibility in Markets with Network Effects," Economics Working Paper Archive 537, The Johns Hopkins University,Department of Economics. [Downloadable!]
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