iPhone or Android? Equilibrium selection in dynamic models with network externalities

• Grant number: 13/24368-7
• Support Opportunities: Scholarships in Brazil - Doctorate
• Start date: March 01, 2014
• End date: June 30, 2016
• Field of knowledge: Applied Social Sciences - Economics - Economic Theory
• Principal Investigator: Bernardo de Vasconcellos Guimaraes
• Grantee: Ana Elisa Gonçalves Pereira
• Host Institution: Escola de Economia de São Paulo (EESP). Fundação Getúlio Vargas (FGV). São Paulo , SP, Brazil
• Associated scholarship(s): 14/06069-5 - Equilibrium selection in dynamic environments with heterogeneity, BE.EP.DR

Abstract

Markets where network externalities play a key role are commonly found. In manycinrcumstances, the utility agents derive from consuming one good is increasing in theamount of agents choosing the same good. One example is the purchase of iPhonesor smartphones with Android: the larger is the number of iPhone users, the largeris the supply of apps and accessories designed to iPhone, and thus the higher is thewillingness to consume this good. Due to this sort of strategic complementarities inagents' decisions, models that describe the behavior of consumers when there are networkexternalities usually present multiple equilibria. Although there is much work ineconomics interested in network effects, little research has been done concerning equilibriumselection in this kind of environment. Instead, authors often assume that agentsmanage to coordinate in the Pareto efficient equilibrium, which does not seem to bea reasonable assumption since consumers make decentralized purchase choices. Thisproject aims to fill this gap, building upon the previous literature on equilibrium selectionin dynamic games, adapting those models to the context of Industrial Organizationand including elements such as heterogeneity in agents' preferences. By providing anequilibrium selection device applicable to these models, our study can contribute to theunderstanding of networks externalities, technological standards adoption, competitionamong platforms in two-sided markets, among others.

Scientific publications

(References retrieved automatically from Web of Science and SciELO through information on FAPESP grants and their corresponding numbers as mentioned in the publications by the authors)

GUIMARAES, BERNARDO; PEREIRA, ANA ELISA. QWERTY is efficient. JOURNAL OF ECONOMIC THEORY, v. 163, p. 819-825, MAY 2016. (14/06069-5, 13/24368-7)

GUIMARAES, BERNARDO; ELISA PEREIRA, ANA. Dynamic coordination among heterogeneous agents. JOURNAL OF MATHEMATICAL ECONOMICS, v. 73, p. 13-33, DEC 2017. (14/06069-5, 13/24368-7)