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Adoption Delay in a Standards War

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Author Info
Marc Rysman () (Boston University)

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Abstract

We analyze a dynamic model in which Þrms and consumers choose to adopt one of two technologies or delay their adoption. Adoption allows agents to trade with other adopters of the same technology. We show that there is an inefficient equlibrium in which Þrms differentiate across standards and consumers delay their adoption. With one standard, there is immediate adoption, which matches the experience of the 56K modem market.

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Paper provided by NET Institute in its series Working Papers with number 03-11.

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Length: 26 pages
Date of creation: Oct 2003
Date of revision: Oct 2003
Handle: RePEc:net:wpaper:0311

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Find related papers by JEL classification:
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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  1. Gale, Douglas, 1995. "Dynamic Coordination Games," Economic Theory, Springer, vol. 5(1), pages 1-18, January.
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  2. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring. [Downloadable!] (restricted)
    Other versions:
  3. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384.
  4. Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Blackwell Publishing, vol. 40(1), pages 85-103, March. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge or Plateau: When do Market Models Tip?," Levine's Bibliography 506439000000000098, UCLA Department of Economics. [Downloadable!]
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  7. Angelique Augereau & Shane Greenstein & Marc Rysman, 2004. "Coordination vs. Differentiation in a Standards War: 56K Modems," NBER Working Papers 10334, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Joseph Farrell & Garth Saloner, 1985. "Installed Base and Compatibility With Implications for Product Preannouncements," Working papers 385, Massachusetts Institute of Technology (MIT), Department of Economics.
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  9. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 53-82, January. [Downloadable!] (restricted)
  10. Lindh, Thomas, 1992. "The inconsistency of consistent conjectures : Coming back to Cournot," Journal of Economic Behavior & Organization, Elsevier, vol. 18(1), pages 69-90, June. [Downloadable!] (restricted)
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  11. Ariel Pakes & Paul McGuire, 1994. "Computing Markov-Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 555-589, Winter. [Downloadable!] (restricted)
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  12. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
  14. Carmen Matutes & Pierre Regibeau, 1988. ""Mix and Match": Product Compatibility without Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 221-234, Summer. [Downloadable!] (restricted)
  15. Levin, Dan & Peck, James, 2003. " To Grab for the Market or to Bide One's Time: A Dynamic Model of Entry," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 536-56, Autumn.
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