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Strategic Maneuvering and Standardization: Critical Advantage or Critical Mass?

Sangin Park

No 596, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: It is widely speculated that the adoption of a technology takes off to be self-sustaining if it reaches the critical mass. However, the sponsors of competing technologies may engage in strategic maneuvering in the adoption process. Indeed, this paper shows that in the de facto standardization process of the U.S. home VCR market, there was strategic maneuvering by the Betamax sponsor, which created only temporary interruptions. The counterfactual simulations, however, indicate that there is no irreversible critical mass and the sponsor of Betamax could reverse the tipping process if it had a critical strategic advantage which is determined by the difference in installed bases and other factors of consumer expectations for future adoption rates

Keywords: network externalities; de facto standardization; strategic maneuvering; critical advantage; VCR (search for similar items in EconPapers)
JEL-codes: L15 L11 L68 (search for similar items in EconPapers)
Date: 2004-08-11
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