Endogenous Switching Costs and Exclusive Systems: A Reply

In a critique of my paper "Technological Incompatibility, Endogenous Switching Costs and Lockin", Haucap (2003) argues that its applicability for policy purposes is limited by its reliance on the assumptions of no market growth and of the firms' ability to commit to technological compatibility. In this note, I show that the results in the paper still hold with market growth and I argue that technological compatibility is a time consistent strategy.