Network Externality, Compatibility Choice, and Planned Obsolescence

Jay Pil Choi

202 citations0/0 files storedJournal of Industrial Economics

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Digital Platforms and Economics Merger and Competition Analysis Consumer Market Behavior and Pricing

Abstract

This paper attempts to provide a formal theory of planned obsolescence based on incompatible technologies in the presence of network externalities. The author explores how a monopolist's ability to make the new product incompatible with the old version of a product constrains the optimal dynamic behavior of the monopolist. The social optimum and the market equilibrium are compared. Finally, the possibility of quality distortion is considered as a commitment mechanism to the future compatibility choice. Copyright 1994 by Blackwell Publishing Ltd.

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References

1986Technology Adoption in the Presence of Network Externalities 1985Standardization, Compatibility, and Innovation 1972Durability and Monopoly 1982Durable-Goods Monopolists 1986An Economic Theory of Planned Obsolescence 1992Converters, Compatibility, and the Control of Interfaces 1986PRODUCT COMPATIBILITY CHOICE IN A MARKET WITH TECHNOLOGICAL PROGRESS*

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