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The Provision of (Two‐way) Converters in the Transition Process to a New Incompatible Technology

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  • Jay Pil Choi

Abstract

This paper analyzes the dynamic provision of converters in the transition process between two incompatible technologies. I derive the equilibrium behavior in the provision of converters and compare it to the socially optimal outcome. I find that there can be two types of market inefficiency in the provision of converters. First, converters can be supplied by the “wrong” group. Second, the timing of provision may be too late since the providers of converters ignore the positive externality that their provision would confer on the users of the rival technology.

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  • Jay Pil Choi, 1997. "The Provision of (Two‐way) Converters in the Transition Process to a New Incompatible Technology," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 139-153, June.
    • Handle: RePEc:bla:jindec:v:45:y:1997:i:2:p:139-153
    DOI: 10.1111/1467-6451.00040
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    Cited by:

    1. Ron Adner & Jianqing Chen & Feng Zhu, 2020. "Frenemies in Platform Markets: Heterogeneous Profit Foci as Drivers of Compatibility Decisions," Management Science, INFORMS, vol. 66(6), pages 2432-2451, June.
    2. Mikhail Klimenko & Kamal Saggi, 2007. "Technical compatibility and the mode of foreign entry with network externalities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(1), pages 176-206, February.
    3. Jiawei Chen & Ulrich Doraszelski & Joseph E. Harrington, Jr., 2009. "Avoiding market dominance: product compatibility in markets with network effects," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 455-485, September.
    4. Charles Zhechao Liu & Esther Gal-Or & Chris F. Kemerer & Michael D. Smith, 2011. "Compatibility and Proprietary Standards: The Impact of Conversion Technologies in IT Markets with Network Effects," Information Systems Research, INFORMS, vol. 22(1), pages 188-207, March.
    5. Filomena Garcia & Cecilia Vergari, 2016. "Revealing Incentives for Compatibility Provision in Vertically Differentiated Network Industries," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(3), pages 720-749, September.
    6. Pollock, Rufus, 2005. "The Control of Porting in Two-Sided Markets," MPRA Paper 5023, University Library of Munich, Germany, revised Jun 2007.
    7. Klimenko, Mikhail M., 2009. "Policies and international trade agreements on technical compatibility for industries with network externalities," Journal of International Economics, Elsevier, vol. 77(2), pages 151-166, April.
    8. Mikhail Klimenko & Kamal Saggi, 2004. "Technical Compatibility and the Mode of Foreign Entry under Network Externalities," Working Papers 04-05, NET Institute, revised Oct 2004.
    9. Charles Z. Liu & Chris F. Kemerer & Michael D. Smith, 2007. "Standards Competition In The Presence Of Digital Conversion Technology: An Empirical Analysis Of The Flash Memory Card Market," Working Papers 07-17, NET Institute, revised Sep 2007.
    10. В.Е. Дементьевi & * & Е.В. Устюжанинаii & **, 2019. "Сравнительный Анализ Стратегий Динамического Ценообразования На Рынках Сетевых Благ В Случаях Монополии И Предконкурентного Стратегического Альянса," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 55(1), pages 16-31, январь.

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