This paper analyzes the process of transition in standards between incompatible technologies when converters are available. Contrary to a common presumption that converters facilitate the transition from an old technology to an otherwise incompatible new technology, I find circumstances in which the possibility of transition is blockaded by the existence of converters. In the welfare analysis of converters, a distinction is made between ex ante and ex post efficiency effects. Finally, I also analyze the equilibrium behavior in the provision of converters and compare it to the socially optimal outcome.
Bibliographical noteFunding Information:
I would like to thank two anonymous referees and Editor Nicholas Economides for their valuable comments which improved the exposition of this paper significantly. The first version of the paper was completed while I was visiting the Center for Economic Research at Tilburg University, whose hospitality and financial support are gratefully acknowledged.
All Science Journal Classification (ASJC) codes
- Industrial relations
- Aerospace Engineering
- Economics and Econometrics
- Economics, Econometrics and Finance (miscellaneous)
- Strategy and Management
- Industrial and Manufacturing Engineering