Technological Standardization with and without Borders in an Interacting Agents Model

Robin Cowan, University of Western Ontario, Canada and University of Maastricht, The Netherlands, and William Cowan, University of Waterloo, Canada

1/01/2005
(Original Publish Date: 2000)

This paper models an economy in which a large number of agents are choosing among several technologies. There is a single, global, market for the technologies but they are subject to localized network externalities in use. We examine the issue of technological standardization, and the coordination of choices among the agents. We generate equilibrium conditions under two spatial conditions--agents located in a featureless plain, and agents located in pre-existing regions with strong borders. We find the conditions under which standardization exists--globally, only locally, or not at all--and derive the effects of different parameters. The presence of a phase change is demonstrated. An appendix provides a derivation of the equilibrium condition used in many interacting agents models.