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Title:Technology adoption in markets with network effects: Theory and experimental evidence PDF Logo
Authors:Keser, Claudia
Suleymanova, Irina
Wey, Christian
Issue Date:2011
Series/Report no.:DICE discussion paper 33
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.
Subjects:Network Effects
Critical Mass
Coordination
Riskiness
JEL:C72
C91
D81
Document Type:Working Paper
Appears in Collections:DICE Discussion Paper, Düsseldorf Institute for Competition Economics (DICE)

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