Technology adoption in markets with network effects: Theory and experimental evidence

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors' own opinions and do not necessarily reflect those of the editor. Terms of use: Documents in Technology Adoption in Markets withNetwork E¤ects: Theory and Experimental Evidence Claudia Keser y Irina Suleymanova z Christian Wey x October 2011 AbstractWe examine a technology adoption game with network e¤ects in which coordination on technology A and technology B constitute a Nash equilibrium. Coordination on technology B is assumed to be payo¤-dominant. We de…ne a technology's critical mass as the minimum share of users necessary to make the choice of this technology a best response for any remaining user. We show that the technology with a lower critical mass is risk-dominant and is chosen by the maximin criterion. We present experimental evidence that both payo¤ dominance and risk dominance explain participants'choices. The relative riskiness of a technology can be proxied using technologies'critical masses or stand-alone values.JEL-Classi…cation: C72, C91, D81

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