Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/215042 
Authors: 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 8040
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper studies the decentralized adoption of a technology standard when network effects are present. If the new standard is incompatible with the current installed base, adoption may be inefficiently delayed. I quantify the magnitude of "excess inertia" in the switch of the movie distribution and exhibition industries from 35mm film to digital. I specify and estimate a dynamic game of digital hardware adoption by theaters and digital movies supply by distributors. Counterfactual simulations establish that excess inertia reduces surplus by 19% relative to the first-best adoption path; network externalities explain 29% of the surplus loss.
Subjects: 
technology adoption
network effects
movie industry
JEL: 
L82
L86
O33
Document Type: 
Working Paper
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