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Market structure and the timing of technology adoption with network externalities

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  • Choi, Jay Pil
  • Thum, Marcel

Abstract

The paper shows that in the presence of network externalities, consumers adopt conventional technologies too early; the waiting option for a newly emerging technology is not exercised enough. This problem is aggravated when the new technology is provided by a single producer with market power because any positive value created via waiting by current consumers will be ex post appropriated by the monopolist. Therefore, the monopolist´s power to extract surplus operates against his own interests in this dynamic setting. The paper also shows how the producer of a new technology can partially overcome the problem of too little waiting by using licensing as a commitment device.
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  • Choi, Jay Pil & Thum, Marcel, 1998. "Market structure and the timing of technology adoption with network externalities," European Economic Review, Elsevier, vol. 42(2), pages 225-244, February.
    • Handle: RePEc:eee:eecrev:v:42:y:1998:i:2:p:225-244
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