1. 1 Doktorandenseminar Prof. König, Prof. Oberweis, Prof. Müller, Prof. Skiera A simulation based on “Competing Technologies, increasing returns, and Lock-in by historical events”

2. Network externalities “ … products for which the utility that a user derives from consumption of the good increases with the number of other agents consuming the good.” [Katz / Shapiro 1985] “Any technology requiring specific training is subject to network externalities: …“ [Katz / Shapiro 1986]

3. Direct network externalities “The consumption externalities may be generated through a direct physical effect of the number of purchasers on the quality of the product.” [Katz / Shapiro 1985]

4. Indirect or market mediated network externalities. “The greater the availability of complementary products, the more attractive the capital good for consumers” [Gupta / Jain / Sawhney 1999]

5. Path dependency First degree: “… instances in which sensitivity to starting points exists, but with no implied inefficiency …” Second degree “… stipulates that intertemporal effects propagate error.” Third degree moreover requires “… that the error was avoidable.” [Liebowitz / Margolis 1995]

6. Lock-In “… if returns increase at different rates, the adoption process may easily become path- inefficient.” [Arthur 1985] Number of previous adoptions0102030405060708090100 Technology A1011121314151617181920 Technology B47101316192225283134

7. Bandwagon effect “Firms that strongly favor the change switch early, while those that only moderately favor wait to see whether others will switch and then get on the bandwagon if it in fact gets rolling.” [Farrell / Saloner 1985]

8. Penguin effect “[p]enguins who must enter the water to find food often delay doing so because they fear the presence of a predator. Each would prefer some other penguin to test the water first.” [Farrell / Saloner 1986]

9. Chicken and egg “The chicken-and-egg problem arises because hardware firms want complementors to spur sales of new hardware products by offering a wide selection of software for the new products, but complementors in turn want to wait until the new hardware products have achieved significant market penetration, before committing to the new hardware platforms.” [Gupta / Jain / Sawhney 1999]

10. Chicken and egg

11. Shock “… an economic shock is an event we didn't anticipate.” Similar concepts sponsoring historical events

12. Arthurs (simple) model a R … basic utility of A for agent type R a S … basic utility of A for agent type S b R … basic utility of B for agent type R b S … basic utility of B for agent type S r… return to adpotion of a technology by agent type R s… return to adpotion of a technology by agent type S n… number of choices made n A (n) … number of choices of A n B (n) … number of choices of B Utility functionTechnology ATechnology B R-Agenta R + r ·n A (n)b R + r ·n B (n) S-Agenta S + s ·n A (n)b S + s ·n B (n)

13. Arthurs (simple) model II Approaching R-agents will adopt technology B iff: a R + r ·n A (n) < b R + r ·n B (n) 

14. Arthurs (simple) model III Approaching S-agents will adopt technology A iff: a S + s ·n A (n) > b S + s ·n B (n) 

15. Excel version of Arthurs model Approaching adoptors: n = n s + p * n e Shock: { technology; period; value}

16. Excel version of Arthurs model II Changing costs A: „The version of A or B each agent chooses is fixed or frozen in design at his time of choice, so that his payoff is affected only by past adoptions of his choosen technology.“ Model deployed here: Payoff is affected by future adoptors, but agents do not take it into account.

17. Excel version of Arthurs model III Changing costs: Agents change from technology B to A iff: a S + s ·n A (n) > b S + s ·n B (n) + cc  cc … cost of changing technology