Product Compatibility and Technological Innovation
This paper explores the relationship between the firms' compatibility choice and quality improving technological progress in a static model. I demonstrate that firms' compatibility choice in anticipation of quality improving innovation critically depends on how users' expectations regarding the network size are formed. In particular, if users have rational expectations the firm with the small innovation will prefer full compatibility whereas the firm with the large innovation will prefer complete incompatibility,, and as a result, with the small innovation, excessive standardization may occur. [D13]
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Volume (Year): 14 (2000)
Issue (Month): 3 ()
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References listed on IDEAS
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- Farrell, Joseph & Saloner, Garth, 1992.
"Converters, Compatibility, and the Control of Interfaces,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 40(1), pages 9-35, March.
- Joseph Farrell and Garth Saloner., 1989. "Converters, Compatibility, and the Control of Interfaces," Economics Working Papers 89-130, University of California at Berkeley.
- Farrell, Joseph, 1989. "Converters, Compatibility, and the Control of Interfaces," Department of Economics, Working Paper Series qt8161p50b, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- De Bijl, Paul W. J. & Goyal, Sanjeev, 1995. "Technological change in markets with network externalities," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 307-325, September.
- de Bijl, P.W.J. & Goyal, S., 1992. "Technological change in markets with network externalities," Discussion Paper 1992-33, Tilburg University, Center for Economic Research.
- De Bijl, P.W.J. & Goyal, S., 1992. "Technological Change in Markets with Network Externalities," Papers 9233, Tilburg - Center for Economic Research.
- Farrell, Joseph, 1986. "A note on inertia in market share," Economics Letters, Elsevier, vol. 21(1), pages 73-75.
- Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
- Katz, Michael L & Shapiro, Carl, 1986. "Product Compatibility Choice in a Market with Technological Progress," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 146-165, Suppl. No.
- Economides, Nicholas, 1989. "Desirability of Compatibility in the Absence of Network Externalities," American Economic Review, American Economic Association, vol. 79(5), pages 1165-1181, December.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
- Michael Kurth, 1985. "Review," Public Choice, Springer, vol. 45(2), pages 223-224, January. Full references (including those not matched with items on IDEAS)
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