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

Claudia Keser, Irina Suleymanova and Christian Wey

No 33, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: We examine a technology adoption game with network effects in which coordination on technology A and technology B constitute a Nash equilibrium. Coordination on technology B is assumed to be payoff-dominant. We define 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 pay-off dominance and risk dominance explain participants' choices. The relative riskiness of a technology can be proxied using technologies' critical masses or stand-alone values.

Keywords: Network Effects; Critical Mass; Coordination; Riskiness (search for similar items in EconPapers)
JEL-codes: C72 C91 D81 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-exp, nep-gth and nep-net
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Technology adoption in markets with network effects: Theory and experimental evidence (2012)
Working Paper: Technology Adoption in Critical Mass Games: Theory and Experimental Evidence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:33

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