ENDOGENOUS TIMING IN THE SWITCHING OF TECHNOLOGY WITH MARSHALLIAN EXTERNALITIES

We analyze endogenous timing in the switching of technology. Each user chooses when to purchase a new product which embodies new technologie s characterized by Marshallian externalities. The technological switch occurs when a large number of users purchase new products. Under comp lete information, multiple market equilibria exist, and one of the equ ilibria in which technological switching occurs is efficient. However, if we introduce even a small amount of uncertainty, the switch is del ayed in the unique equilibrium under perfect competition, resulting in a loss of social welfare. The market power of a monopolistic supplier of new products alleviates this inefficiency.