Positive Feedbacks and Lock-in by Random Events

Elettra Agliardi
Additional contact information
Elettra Agliardi: University of Bologna

Chapter 5 in Positive Feedback Economies, 1998, pp 91-111 from Palgrave Macmillan

Abstract: Abstract It has long been argued that as a result of externalities the value of choosing a technology may be enhanced by the fact that other firms have previously chosen it. This issue has been tackled by Brian Arthur and Paul David in their writings on cumulative causation occurring in path-dependent processes which have affected much of the literature about the dynamics of allocation under increasing returns occasioned by learning-by-doing and learning-by-using phenomena. The idea is that ‘history matters’ when increasing returns to adoption are introduced. If one technology gets ahead by good fortune it gains an advantage, with the result that the adoption market may ‘tip’ in its favour and may end up dominated by it. With different circumstances, a different technology might have been favoured early on and it might have come to dominate the market. Thus in competition between technologies with increasing returns there are possible multiple equilibria. As to which actual outcome is selected from these multiple candidate outcomes, it is argued that the prevailing outcome turns out to depend on the path which has been initially chosen. In particular, the resulting outcome may be inefficient; that is, the market may be locked-in to the ‘wrong’ technology.

Keywords: Positive Feedback Economy; Adoption Process; Cumulative Causation; Future Adoption; Bandit Process (search for similar items in EconPapers)
Date: 1998
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37621-2_6

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230376212

DOI: 10.1057/9780230376212_6

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().