Network Externalities, Critical Masses and Converters. An Evolutionary Analysis

Witt (1997) proposes a model of technological adoption in markets characterized by network externalities in which superior technological standards have smaller critical mass, so that they can easily displace inferior alternatives. This paper builds on his model to show that the critical mass of a given technology depends upon its e.ciency and its compatibility with the existing standard, and hence that more efficient technologies need not have smaller critical masses. Some consequences for the economics of converters and ”gateway technologies” are also discussed.