Endogenous timing in the switching of technology with Marshallian externalities

Toshihiro Matsumura*, Masako Ueda

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

We analyze endogenous timing in the switching of technology. Each user chooses when to purchase a new product which embodies new technologies characterized by Marshallian externalities. The technological switch occurs when a large number of users purchase new products. Under complete information, multiple market equilibria exist, and one of the equilibria in which technological switching occurs is efficient. However, if we introduce even a small amount of uncertainty, the switch is delayed in the unique equilibrium under perfect competition, resulting in a loss of social welfare. The market power of a monopolistic supplier of new products alleviates this inefficiency.

Original languageEnglish (US)
Pages (from-to)41-56
Number of pages16
JournalJournal of Economics/ Zeitschrift fur Nationalokonomie
Volume63
Issue number1
DOIs
StatePublished - Jan 1 1996

Keywords

  • Endogenous timing
  • Network externality
  • Technological switch

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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