Technology Adoption in Critical Mass Games: Theory and Experimental Evidence

43 Pages Posted: 23 Apr 2010

See all articles by Claudia Keser

Claudia Keser

University of Goettingen (Göttingen)

Irina Suleymanova

German Institute for Economic Research (DIW Berlin)

Christian Wey

University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE)

Date Written: December 1, 2009

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 Classification: C72, C91, D91, D84

Suggested Citation

Keser, Claudia and Suleymanova, Irina and Wey, Christian, Technology Adoption in Critical Mass Games: Theory and Experimental Evidence (December 1, 2009). DIW Berlin Discussion Paper No. 961, Available at SSRN: https://ssrn.com/abstract=1592841 or http://dx.doi.org/10.2139/ssrn.1592841

Claudia Keser (Contact Author)

University of Goettingen (Göttingen) ( email )

Platz der Göttinger Sieben 3
Göttingen, 37073
Germany

Irina Suleymanova

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Christian Wey

University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany
+49-211-81-15009 (Phone)
+49-211-81-15499 (Fax)

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