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

Claudia Keser, Irina Suleymanova and Christian Wey

Information Economics and Policy, 2012, vol. 24, issue 3, 262-276

Abstract: We examine a technology-adoption game with network effects in which coordination on either technology A or technology B constitutes a Nash equilibrium. Coordination on technology B is assumed to be payoff dominant. We define a technology’s critical mass as the minimal share of users, which is necessary to make the choice of this technology the best response for any remaining user. We show that the technology with the lower critical mass implies risk dominance and selection by the maximin criterion. We present experimental evidence that both payoff dominance and risk dominance explain participants’ choices in the technology-adoption game. The relative riskiness of a technology can be proxied using either technologies’ critical masses or stand-alone values absent any network effects.

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: 2012
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Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Technology adoption in markets with network effects: Theory and experimental evidence (2011)
Working Paper: Technology Adoption in Critical Mass Games: Theory and Experimental Evidence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:24:y:2012:i:3:p:262-276

DOI: 10.1016/j.infoecopol.2012.03.001

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