We investigate the effects of forward looking behavior in technology adoption. The setup is an overlapping generation model where agents choose between two alternative networks taking in consideration both the installed base and the expected base. The latter element is the distinctive feature of our approach. We use results from the global games literature to select the unique equilibrium on which agents coordinate their expectations. We consider both the cases of incompatible and compatible technologies, and show that technologies cannot lock-in, while the adoption path exhibits hysteresis. Network choices are characterized both in terms of their long run properties and expected time of adoption.
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number
2004041.
Find related papers by JEL classification: C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games L0 - Industrial Organization - - General O3 - Economic Development, Technological Change, and Growth - - Technological Change
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