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Journal of Economics

, Volume 63, Issue 1, pp 41–56 | Cite as

Endogenous timing in the switching of technology with Marshallian externalities

  • Toshihiro Matsumura
  • Masako Ueda
Articles

Abstract

We analyze endogenous timing in the switching of technology. Each user chooses when to purchase a new product which embodies new technologies characterized by Marshallian externalities. The technological switch occurs when a large number of users purchase new products. Under complete information, multiple market equilibria exist, and one of the equilibria in which technological switching occurs is efficient. However, if we introduce even a small amount of uncertainty, the switch is delayed in the unique equilibrium under perfect competition, resulting in a loss of social welfare. The market power of a monopolistic supplier of new products alleviates this inefficiency.

Keywords

technological switch network externality endogenous timing 

JEL classification

C72 O33 

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Copyright information

© Springer-Verlag 1996

Authors and Affiliations

  • Toshihiro Matsumura
    • 1
  • Masako Ueda
    • 2
  1. 1.Institute of Social and Economic ResearchOsaka UniversityIbaraki, OsakaJapan
  2. 2.Finance Department, Wharton SchoolUniversity of PennsylvaniaPhiladelphiaUSA

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