Technology Adoption in Critical Mass Games: Theory and Experimental Evidence

Claudia Keser, Irina Suleymanova and Christian Wey

No 961, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We analyze the choices between two technologies A and B that both exhibit network effects. We introduce a critical mass game in which coordination on either one of the standards constitutes a Nash equilibrium outcome while coordination on standard B is assumed to be payoff-dominant. We present a heuristic definition of a critical mass and show that the critical mass is inversely related to the mixed strategy equilibrium. We show that the critical mass is closely related to the risk dominance criterion, the global game theory, and the maximin criterion. We present experimental evidence that both the relative degree of payoff dominance and risk dominance explain players' choices. We finally show that users' adoption behavior induces firms to select a relatively unrisky technology which minimizes the problem of coordination failure to the benefit of consumers.

JEL-codes: C72 C91 D84 D91 (search for similar items in EconPapers)
Pages: 40 p.
Date: 2009
New Economics Papers: this item is included in nep-exp, nep-gth and nep-net
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Technology adoption in markets with network effects: Theory and experimental evidence (2012)
Working Paper: Technology adoption in markets with network effects: Theory and experimental evidence (2011)
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