Competing Technologies, Increasing Returns, and Lock-In by Historical Events
1989/03/01 by W. Brian Arthur · 101 citations
Business, Management and Accounting · Decision Sciences · #Digital Platforms and Economics #Innovation Diffusion and Forecasting #Auction Theory and Applications
paper · doi:10.2307/2234208
Abstract
This paper examines the dynamics of allocation under increasing returns within a model where agents choose between technologies competing for adoption and where each technology improves as it gains in adoption. It shows that the economy, over time, can become locked-in, by "random" historical events, to a technological path that is not necessarily efficient, not possible to predict from usual knowledge of supply and demand functions, and not easy to change by standard tax or subsidy policies. Rational expectations about future agents' technology choices can exacerbate this lock-in tendency. It discusses the implications for economic history, policy, and forecasting. Copyright 1989 by Royal Economic Society.
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