A note on critical masses, network externalities and converters

Witt (Int. J. Ind. Organ. 15 (1997) 753) demonstrates that superior technological standards have smaller critical mass, so that they can easily displace inferior alternatives. This note builds on his model to show that the critical mass of a given technology depends upon its efficiency 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.