DO CONVERTERS FACILITATE THE TRANSITION TO A NEW INCOMPATIBLE TECHNOLOGY - A DYNAMIC ANALYSIS OF CONVERTERS

This paper analyzes the process of transition in standards between inc ompatible technologies when converters are available. Contrary to a co mmon presumption that converters facilitate the transition from an old technology to an otherwise incompatible new technology, I find circum stances in which the possibility of transition is blockaded by the exi stence of converters. In the welfare analysis of converters, a distinc tion is made between ex ante and ex post efficiency effects. Finally, I also analyze the equilibrium behavior in the provision of converters and compare it to the socially optimal outcome.