"Double Purchase" in the Transition Process to a New Incompatible Technology

Abstract

This paper analyzes the problem of "double purchase" that may occur during the transition process between old technology and new incompatible technology. When network externalities are important and converters are unavailable, some consumers will join both networks in order to reap the benefits of compatibility. It also generates some negative factors simultaneously. Our model posts when these negative factors will affect the new technology owner's incentive of making "double purchase" realistic for consumers. The findings also show why some special dual-module combo products emerge in the transition process.