Complementary network externalities and technological adoption

Jeffrey Church*, Neil Gandal

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

125 Scopus citations


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.

Original languageEnglish
Pages (from-to)239-260
Number of pages22
JournalInternational Journal of Industrial Organization
Issue number2
StatePublished - Jun 1993


FundersFunder number
Social Sciences and Humanities Research Council of Canada


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