Advertisement

Network Evolution

  • Charles B. Blankart
  • Günter Knieps
Conference paper
Part of the Studies in Contemporary Economics book series (CONTEMPORARY)

Abstract

Recent economic historians have emphasized the relevance of the past for finding new solutions in the present. They claim that history is path dependent. Economy could become locked-in to inefficient structures even by insignificant events. This phenomenon may lead to evolutionary market failure. It seems quite natural, that economic historians try to analyse path dependence by means of historical examples. A menu of interesting examples has been provided by Arthur (1984) including the U.S. color television system, the driving-on-the-left convention in Britain and the extreme longevity of the 1950’s programming language FORTRAN as well as QWERTY arrangement of keys on the topmost row of letters of a typewriter.1 Although one may find these examples more or less convincing they help to understand locked-in situations from which nobody is willing to depart though departure might be socially beneficial. This phenomenon has to do with network externalities.

Keywords

Network Effect Network Externality Network Evolution Railroad System Social Planning 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Arthur, W.B., 1984, Competing Technologies and Economic Prediction, Options, International Institute for Applied Systems Analysis, Laxenburg, Austria, No. 2: 10–13.Google Scholar
  2. Blankart, Ch.B. and Knieps, G., 1992, “The Critical Mass Problem in a Dynamic World: Theory and Applications to Telecommunications”, forthcoming in: J. Arnback (ed.), Proceedings of the 6th Conference on European Communications Policy Research, Amsterdam.Google Scholar
  3. Blankart, Ch.B. and Knieps, G., 1992, “Netzökonomik”, forthcoming in: Jahrbuch für Neue Politische Ökonomie 11, Tübingen.Google Scholar
  4. Chou, Ch. and Shy, O., 1990, “Network Effects without Network Externalities”, International Journal of Industrial Organization 8: 259–270.CrossRefGoogle Scholar
  5. David, P.A., 1989, “A Paradigm for Historical Economics: Path Dependence and Predictability in Dynamic Systems with Local Network Externalities”, Stanford University, Working paper, Revised, March.Google Scholar
  6. David, P.A., 1985, “Clio and the Economics of QWERTY”, American Economic Review, Papers and Proceedings 75, 2: 332–337.Google Scholar
  7. Farrell, J. and Saloner, G., 1985, “Standardization, Compatibility and Innovation”, Rand Journal of Economics 16, 1: 70–83.CrossRefGoogle Scholar
  8. Farrell, J. and Saloner, G., 1986, “Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation”, American Economic Review 76, 5: 940–955.Google Scholar
  9. Grindley, G., 1989, “Product Standards and Market Development: The Case of Video Cassette Recorders”, mimeo, London Business School, London.Google Scholar
  10. Katz, M.L. and Shapiro, C., 1986, “Technology Adaption in the Presence of Network Externalities”, Journal of Political Economy 94, 4: 822–841.CrossRefGoogle Scholar
  11. Liebowitz, S.J. and Margolis, St.E., 1990, “The Fable of the Keys”, Journal of Law and Economics 33, 1: 1–25.Google Scholar

Copyright information

© Physica-Verlag Heidelberg 1993

Authors and Affiliations

  • Charles B. Blankart
  • Günter Knieps
    • 1
    • 2
  1. 1.Technische Universität BerlinGermany
  2. 2.Rijksuniversiteit GroningenThe Netherlands

Personalised recommendations