"Lock-in" vs. "critical masses" -- Industrial change under network externalities

Abstract Where increasing returns to adoption play a role in the diffusion of a new technology, technological “lock-in” is now often claimed to occur. However, this result, and the modeling approach that produces it, are problematic. Further innovations could never have a chance of disseminating, if “lock-in” had occurred in the diffusion process of earlier innovations. Yet, in reality, industrial change does not come to a halt. The paper offers a discussion of the apparent paradox. From an alternative modeling approach conditions are derived under which a newly introduced technology can successfully disseminate in the market despite existing network externalities.

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