| Author: | Farrell, J. Saloner, G. |
| Title: | Installed base and compatibility: Innovation, product preannouncements, and predation. (!COMPLEMENTARY PRODUCTS)(!COMPATIBLE GOODS) |
| Journal: | American Economic Review
1986 : DEC, VOL. 76:5, p. 940-970 |
| Index terms: | INNOVATION TECHNOLOGY STANDARDS |
| Language: | eng |
| Abstract: | A good is often more valuable to any user,the more others use compatible goods. It is shown that this effect may inhibit innovation. If an installed base exists and transition to a new standard must be gradual early adopters bear a disproportionate share of transient incompatibility costs. This can cause "excess inertia". The installed base, however,is "stranded" if the new standard is adopted: this may create "excess momentum". These dynamic effects have strategic implications. The direction of further investigation are also discussed. |
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