Self-Reinforcing Mechanisms and Market Information
We consider the possibility of switching between two technological standards when there are network externalities and imprecise market information. Multiple equilibria in terms of market shares can arise. The main result is that lock-in to one of multiple equilibria is not a permanent out- come when the source of lock-in is network externalities. The market lingers at prevalence of one standard with intermittent transitions to prevalence of the other. In other words, lock-in is a temporary occurrence.
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|Date of creation:||1992|
|Date of revision:|
|Contact details of provider:|| Postal: UNIVERSITY OF CAMBRIDGE, RESEARCH PROJECT ON RISK, INFORMATION AND QUANTITY SIGNALS IN ECONOMICS(E.S.R.C.), DEPARTMENT OF APPLIED ECONOMICS, SIDGWICK AV. CAMBRIDGE CB3 9DEDE U.K..|
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- Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March.
- 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 146-65, Suppl. No.
- Farrell, Joseph & Shapiro, Carl, 1988.
"Dynamic Competition with Switching Costs,"
Department of Economics, Working Paper Series
qt1h02g9q4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August.
- Agliardi, Elettra & Bebbington, Mark, 1994. "Self-reinforcing mechanisms and interactive behaviour," Economics Letters, Elsevier, vol. 46(3), pages 281-287, November.
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