Adoption Delay in a Standards War

We analyze a dynamic model in which Þrms and consumers choose to adopt one of two technologies or delay their adoption. Adoption allows agents to trade with other adopters of the same technology. We show that there is an inefficient equlibrium in which Þrms differentiate across standards and consumers delay their adoption. With one standard, there is immediate adoption, which matches the experience of the 56K modem market.

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