Abstract
This paper explores the relationship between the firms' compatibility choice and quality improving technological progress in a static model. I demonstrate that firms' compatibility choice in anticipation of quality improving innovation critically depends on how users' expectations regarding the network size are formed. In particular, if users have rational expectations the firm with the small innovation will prefer full compatibility whereas the firm with the large innovation will prefer complete incompatibility,, and as a result, with the small innovation, excessive standardization may occur. [D13]
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.