Market structure and the timing of technology adoption with network externalities

Jay Pil Choi, Marcel Thum

Research output: Contribution to journalArticle

46 Citations (Scopus)

Abstract

The paper shows that in the presence of network externalities, consumers adopt conventional technologies too early; the waiting option for a newly emerging technology is not exercised enough. This problem is aggravated when the new technology is provided by a single producer with market power because any positive value created via waiting by current consumers will be ex post appropriated by the monopolist. Therefore, the monopolist's power to extract surplus operates against his own interests in this dynamic setting. The paper also shows how the producer of a new technology can partially overcome the problem of too little waiting by using licensing as a commitment device.

Original languageEnglish
Pages (from-to)225-244
Number of pages20
JournalEuropean Economic Review
Volume42
Issue number2
DOIs
Publication statusPublished - 1998 Feb

    Fingerprint

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this