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Structural change in the presence of network externalities: a co-evolutionary model of technological successions

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  • Paul Windrum
  • Chris Birchenhall

Abstract

The paper uses a two-stage, multi-agent simulation model to examine the conditions under which technological successions can occur in the presence of network externalities. Data is used to identify a robust econometric model of the probability of succession. Four key factors are identified. First, the trade-off between higher direct utility from new technology goods and the network utility of old technology goods. Second, the relative innovative performance of new and old technology firms. Third, cost (price) differentials due to increasing returns in production. Fourth, the time old (new) firms have to develop their product designs prior to entry. Copyright Springer-Verlag Berlin/Heidelberg 2005

Suggested Citation

  • Paul Windrum & Chris Birchenhall, 2005. "Structural change in the presence of network externalities: a co-evolutionary model of technological successions," Journal of Evolutionary Economics, Springer, vol. 15(2), pages 123-148, January.
    • Handle: RePEc:spr:joevec:v:15:y:2005:i:2:p:123-148
    DOI: 10.1007/s00191-004-0226-8
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