Abstract.
The paper uses a two-stage, multi-agent simulation model to examine the conditions under which technological successions can occur in the presence of network externalities. Data is used to identify a robust econometric model of the probability of succession. Four key factors are identified. First, the trade-off between higher direct utility from new technology goods and the network utility of old technology goods. Second, the relative innovative performance of new and old technology firms. Third, cost (price) differentials due to increasing returns in production. Fourth, the time old (new) firms have to develop their product designs prior to entry.
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JEL Classification:
O30, C15
Correspondence to: Paul Windrum
The authors would like to thank Richard Nelson and Uwe Cantner for their helpful comments on an earlier draft of the paper, and for the comments provided by the anonymous referees. The usual disclaimers apply. The authors gratefully acknowledge supportive funding through SEIN-Project, European Commission’s Framework 4 Programme (contract# SOEI-CT-98-1107) and through the Policy Regimes and Environmental Transitions (PRET) project funded by the Dutch Scientific Research Council (NWO).
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Windrum, P., Birchenhall, C. Structural change in the presence of network externalities: a co-evolutionary model of technological successions. J Evol Econ 15, 123–148 (2005). https://doi.org/10.1007/s00191-004-0226-8
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DOI: https://doi.org/10.1007/s00191-004-0226-8