Self-reinforcing mechanisms and market information

✍ Scribed by E. Agliardi; M.S. Bebbington

• Book ID: 104339310
• Publisher: Elsevier Science
• Year: 1997
• Tongue: English
• Weight: 822 KB
• Volume: 96
• Category: Article
• ISSN: 0377-2217
• DOI: 10.1016/s0377-2217(96)00093-8

✦ Synopsis

We consider the possibility of switching between two technological standards when there are network externalities and imprecise market information, by modeling the decisions of each firm by a stochastic process. Necessary and sufficient conditions for there to be multiple equilibria in market share, and for permanent lock-in to one of these equilibria not to occur, are presented. In such a case, the market lingers at prevalence of one standard with intermittent transitions to prevalence of the other, the frequency of which is derived by the theory of large deviations.