The paper attempts to provide a formal theory of planned obsolescence
based on incompatible technologies in the presence of network external
ities. We explore how a monopolist's ability to make the new product i
ncompatible with the old version of a product constrains the optimal d
ynamic behavior of the monopolist. The social optimum and the market e
quilibrium are compared. Finally, the possibility of quality distortio
n is considered as a commitment mechanism to the future compatibility
choice.