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Why the QWERTY phenomenon is not just in the theorists’ minds yet not pose a problem in reality

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Abstract

Researchers disagree about the relevance of the so-called QWERTY phenomenon, which simply means getting stuck in a bad equilibrium. Two contrasting perspectives exist in the academic sector. One camp argues that the higher quality of a product or service exerts a major influence on its market success. Consequently, an inferior market player should not persist, and the possibility of the QWERTY phenomenon is denied by this party. The opposite group emphasises the importance of network effects, which can lead to lock-ins in inferior situations. In this paper, we investigate this debate. We demonstrate that the missing consideration of the status quo bias in previous studies leads to a rejection of the QWERTY phenomenon. We give several examples of different industries with inferior market share leaders. However, we suggest that this phenomenon only causes temporary harm, and the lock-in could be overcome by a specific form of Schumpeterian creative destruction. Therefore, we claim that even if lockins exist, they pose no problems as long as innovative market participants have the opportunity to develop and introduce new business models.

Suggested Citation

  • Fabian Grabicki & Jens Weghake, 2016. "Why the QWERTY phenomenon is not just in the theorists’ minds yet not pose a problem in reality," TUC Working Papers in Economics 0016, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
    • Handle: RePEc:tuc:tucewp:0016
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    More about this item

    Keywords

    platform selection; two-sided markets; status quo bias; QWERTY-phenomenon; creative destruction;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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