Irreversible Choice of Uncertain Technologies with Network Externalities
AbstractIn this article, I explore the problem of sequential and irreversible technology choice in the presence of network externalities when the technologies stochastically evolve over time. Early potential users are shown to adopt an irreversible technology too early compared to the social optimum. The effect of increasing the uncertainty of the technologies on an early potential user's decision is analyzed. I find that the sponsor of new emerging technology might choose a research strategy that is too safe. I also study the consequences of allowing side payments between generations of consumers and demonstrate that an ex post optimal standardization policy can impair ex ante social welfare.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 25 (1994)
Issue (Month): 3 (Autumn)
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Other versions of this item:
- Choi, J.P., 1992. "Irreversible Choice of Uncertain Technologies with Network Externalities," Discussion Papers 1992_27, Columbia University, Department of Economics.
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