ADOPTION OF NETWORK TECHNOLOGIES IN OLIGOPOLIES

We analyze a two-stage non-cooperative game when the firms choose firs t to adopt (either simultaneously or sequentially) one of two network technologies, and then compete on the market. The two-stage procedure and the assumption that firms have heterogeneous tastes with respect t o the technologies lead to a novel treatment of network externalities. In particular, as the network of some firm enlarges, the change in th is firm's payoff is shown to depend both on the newcomer's identity an d on the composition of the networks and, as a result, is not necessar ily positive. (C) 1998 Elsevier Science B.V.