Bandwagon Effects and Long Run Technology Choice

Abstract

We introduce a class of "bandwagon games" which generalizes the notion of network externalities when there are more than two competing technologies and various degrees of partial compatibilities among them. We then apply the stochastic evolutionary approach to this class of games. We determine the conditions under which aglobally pairwise risk-dominanttechnology is the long-run equilibrium (LRE). We also show the conditions under which one technology takes over another technology by directly switching consumers from the latter to the former (also calleddirect domination). Parametric examples illustrate the properties of the technology which is the LRE.Journal of Economic LiteratureClassification Numbers: C72, C73. © 1998 Academic Press.