Network Externalities and the Dynamics of Markets
The evolution of markets on which network externalities prevail can be expected to differ from "classical markets" where no such externalities exist. We suggest a flexible formal model that describes the dynamics od types of markets. This leads to a stochastic version of the well known replicator dynamics. Based on this approach we analyze the limit behavior of different market types where consumers use stochastic decision rules. We show that market shares converge to the set of equilibria with probability one, where, even under network externalities, several technologies can coexist. On the other hand, even if no network externalities prevail it is possible that only one technology stays in the market. This paper contributes to the work on generalized urn schemes and path dependent processes going on at IIASA.
|Date of creation:||Nov 1998|
|Contact details of provider:|| Postal: A-2361 Laxenburg|
Web page: http://www.iiasa.ac.at/Publications/Catalog/PUB_ONLINE.html
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Posch, 1997. "Cycling in a stochastic learning algorithm for normal form games," Journal of Evolutionary Economics, Springer, vol. 7(2), pages 193-207.
- David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
- Church, Jeffrey & Gandal, Neil, 1993.
"Complementary network externalities and technological adoption,"
International Journal of Industrial Organization,
Elsevier, vol. 11(2), pages 239-260, June.
- Church, J. & Gandal, N., 1991. "Complementary Network Externalities and Technological Adoption," Papers 5-91, Tel Aviv.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
- Dosi, Giovanni & Ermoliev, Yuri & Kaniovski, Yuri, 1994. "Generalized urn schemes and technological dynamics," Journal of Mathematical Economics, Elsevier, vol. 23(1), pages 1-19, January.
- Arthur, W Brian, 1993. "On Designing Economic Agents That Behave Like Human Agents," Journal of Evolutionary Economics, Springer, vol. 3(1), pages 1-22, February.
- 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 822-841, August.
- Brian Arthur, W. & Ermoliev, Yu. M. & Kaniovski, Yu. M., 1987. "Path-dependent processes and the emergence of macro-structure," European Journal of Operational Research, Elsevier, vol. 30(3), pages 294-303, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wop:iasawp:ir98089. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.