TY - JOUR
T1 - Complementary network externalities and technological adoption
AU - Church, Jeffrey
AU - Gandal, Neil
N1 - Funding Information:
Calgary, Alberta T2N lN4, Canada. *We are especially grateful to Robert Masson for many helpful suggestions. We also wish to thank Richard Gilbert, Michael Katz, Jeff Perloff, Susanne Scotchmer, two anonymous referees, and seminar participants at Harvard University, GTE Labs, Boston College, University of Alberta, Boston University, University of Calgary, Canadian Economics Association Annual Meeting, Canadian Economic Theory Conference, and the Sixth World Congress of the Econometric Society. Church gratefully acknowledges the financial support provided by the Social Sciences and Humanities Research Council of Canada.
PY - 1993/6
Y1 - 1993/6
N2 - We address the adoption of technology when there are network externalities and networks are characterized by complementary products produced by different firms. We show that when the software firms are Bertrand competitors, a hardware technology with lower software development costs is adopted for many parameter values for which it is socially optimal to adopt the other technology. The over-adoption is due to a discrepancy between the private and social benefit of having a larger network.
AB - We address the adoption of technology when there are network externalities and networks are characterized by complementary products produced by different firms. We show that when the software firms are Bertrand competitors, a hardware technology with lower software development costs is adopted for many parameter values for which it is socially optimal to adopt the other technology. The over-adoption is due to a discrepancy between the private and social benefit of having a larger network.
UR - http://www.scopus.com/inward/record.url?scp=21144472751&partnerID=8YFLogxK
U2 - 10.1016/0167-7187(93)90006-X
DO - 10.1016/0167-7187(93)90006-X
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AN - SCOPUS:21144472751
SN - 0167-7187
VL - 11
SP - 239
EP - 260
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
IS - 2
ER -