We study the adoption patterns of two competing technologies as well as the effectiveness and optimality of viral pricing strategies. Our model considers two incompatible technologies of differing quality and a market in which valuations are heterogeneous and subject to externalities. We provide partial characterization results about the structure and robustness of equilibria and give conditions under which a technology purveyor can gains in market share. We show that myopic best-response dynamics are monotonic and convergent, and propose two pricing mechanisms using this insight to help a technology seller tip the market in its favor. In particular, we show that non-discriminatory pricing is less costly and just as effective as a discriminatory policy. Finally, we study endogenous pricing using simulations and now find, in contrast to our analytical results with exogenous prices, that a higher quality technology consistently holds a competitive advantage over the lower quality competitor, irrespective of its market share.
Corbo, Jacomo and Vorobeychik, Yevgeniy, "Quality and Price Effects on Technology Adoption" (2009). ICIS 2009 Proceedings. 40.