Modeling the Dynamics of Network Technology Adoption and the Role of Converters

Abstract

New network technologies constantly seek to displace incumbents. Their success depends on technological superiority, the size of the incumbent's installed base, users' adoption behaviors, and various other factors. The goal of this paper is to develop an understanding of competition between network technologies, and identify the extent to which different factors, in particular converters (a.k.a. gateways), affect the outcome. Converters can help entrants overcome the influence of the incumbent's installed base by enabling cross-technology interoperability. However, they have development, deployment, and operations costs, and can introduce performance degradations and functionality limitations, so that if, when, why, and how they help is often unclear. To this end, the paper proposes and solves a model for adoption of competing network technologies by individual users. The model incorporates a simple utility function that captures key aspects of users' adoption decisions. Its solution reveals a number of interesting and at times unexpected behaviors, including the possibility for converters to reduce overall market penetration of the technologies and to prevent convergence to a stable state; something that never arises in their absence. The findings were tested for robustness, e.g., different utility functions and adoption models, and found to remain valid across a broad range of scenarios. KeywordsTechnology adoption, diffusion, externality, converters, dynamics, equilibrium. This material is posted here with permission of the IEEE. Such permission of the IEEE does not in any way imply IEEE endorsement of any of the University of Pennsylvania's products or services. Internal or personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution must be obtained from the IEEE by writing to pubs-permissions@ieee.org. By choosing to view this document, you agree to all provisions of the copyright laws protecting it.This journal article is available at ScholarlyCommons: http://repository.upenn.edu/ese_papers/531 Abstract-New network technologies constantly seek to displace incumbents. Their success depends on technological superiority, the size of the incumbent's installed base, users' adoption behaviors, and various other factors. The goal of this paper is to develop an understanding of competition between network technologies, and identify the extent to which different factors, in particular converters (a.k.a. gateways), affect the outcome. Converters can help entrants overcome the influence of the incumbent's installed base by enabling cross-technology interoperability. However, they have development, deployment, and operations costs, and can introduce performance degradations and functionality limitations, so that if, when, why, and how they help is often unclear. To this end, the paper proposes and solves a model for adoption of competing network technologies by indivi...

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