The Troubled Path of the Lock-In Movement

Abstract

Paul David (1985), Brian Arthur (1989) and others introduced a 'new economics' of increasing returns, alleging problems of path dependence and lock-in. These conditions were claimed to constitute market failure and were soon featured in antitrust actions, most famously in Microsoft. We (1990, 1994) challenged the empirical support for these theories and their real-world applicability. Subsequently, David and others have responded, arguing that lock-in theories require no empirical support, market failures were never an important feature of their writings, and the empirical evidence that had been forward was never meant to be taken literally. Nevertheless, David and others claim that their theories have policy significance. Indeed, lock-in claims continue to appear as a basis for antitrust action. We now respond to the response of David and others, review new developments in this literature, and consider antitrust implications in light of the deficiencies in lock-in theories and related empirical work.

Keywords: qwerty, path dependence, lock-in, network effect, Paul David, Brian Arthur, network externality

JEL Classification: K2, L4, L5, O3