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Third-party Provision of Conversion Technologies in Network Markets

Third-party Provision of Conversion Technologies in Network Markets;
Third-party Provision of Conversion Technologies in Network Markets

Author
Varé, Arnaud

Seifert, Ralf

Full text
https://www.jotmi.org/index.php/GT/article/view/art111
10.4067/S0718-27242009000200001
Abstract
In network markets, the provision of third-party converters is an important dimension of standards wars. In this paper, we develop a mathematical model to analyze the effects of third-party converter introduction on the adoption process of incumbents’ base technologies and discuss managerial insights based on our model. We determine converter introduction strategies of third parties by establishing under what circumstances third parties may maximize their profit. We find that there exists an optimal introduction time for converters, which depends on a trade-off between conversion option and consumers’ memory effect. The preferred conversion option is mostly two-way conversion. As a result of converter provision, converter introduction affects the de facto standardization process of the incumbents’ base technologies by accelerating the lock-in process of the dominant technology. We then discuss how incumbents can anticipate and react to third-party converter introduction in order to reduce the third parties’ incentive to introduce converters. Throughout the paper, we illustrate our analytical results with numerical examples.
 
In network markets, the provision of third-party converters is an important dimension of standards wars. In this paper, we develop a mathematical model to analyze the effects of third-party converter introduction on the adoption process of incumbents’ base technologies and discuss managerial insights based on our model. We determine converter introduction strategies of third parties by establishing under what circumstances third parties may maximize their profit. We find that there exists an optimal introduction time for converters, which depends on a trade-off between conversion option and consumers’ memory effect. The preferred conversion option is mostly two-way conversion. As a result of converter provision, converter introduction affects the de facto standardization process of the incumbents’ base technologies by accelerating the lock-in process of the dominant technology. We then discuss how incumbents can anticipate and react to third-party converter introduction in order to reduce the third parties’ incentive to introduce converters. Throughout the paper, we illustrate our analytical results with numerical examples.
 
In network markets, the provision of third-party converters is an important dimension of standards wars. In this paper, we develop a mathematical model to analyze the effects of third-party converter introduction on the adoption process of incumbents’ base technologies and discuss managerial insights based on our model. We determine converter introduction strategies of third parties by establishing under what circumstances third parties may maximize their profit. We find that there exists an optimal introduction time for converters, which depends on a trade-off between conversion option and consumers’ memory effect. The preferred conversion option is mostly two-way conversion. As a result of converter provision, converter introduction affects the de facto standardization process of the incumbents’ base technologies by accelerating the lock-in process of the dominant technology. We then discuss how incumbents can anticipate and react to third-party converter introduction in order to reduce the third parties’ incentive to introduce converters. Throughout the paper, we illustrate our analytical results with numerical examples.
 
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Discipline
Artes, Arquitectura y UrbanismoCiencias Agrarias, Forestales y VeterinariasCiencias Exactas y NaturalesCiencias SocialesDerechoEconomía y AdministraciónFilosofía y HumanidadesIngenieríaMedicinaMultidisciplinarias
Institutions
Universidad de ChileUniversidad Católica de ChileUniversidad de Santiago de ChileUniversidad de ConcepciónUniversidad Austral de ChileUniversidad Católica de ValparaísoUniversidad del Bio BioUniversidad de ValparaísoUniversidad Católica del Nortemore

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