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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DICE Discussion Paper ; No. 33

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Design of Experiments: Laboratory, Individual ; Criteria for Decision-Making under Risk and Uncertainty
• Subject: Network Effects ; Critical Mass ; Coordination ; Riskiness

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Keser, Claudia ; Suleymanova, Irina ; Wey, Christian
• Event: Veröffentlichung
• (who): Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
• (where): Düsseldorf
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/50734
• Last update: 10.03.2025, 11:41 AM CET