The role of compatibility in the diffusion of technologies through social networks
Proceedings of the 8th ACM conference on Electronic commerce
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Social networks form the basic structure for the diffusion of technologies throughout a society. We present a simple model of Morris [8] for this diffusion based on myopic best-response behavior of the agents and derive necessary and sufficient conditions for a new technology to inflitrate a network in which all agents are intially using an incumbant technology. We then discuss an extention of this model based on joint work with Kleinberg, Mahdian, and Wexler [6] which incorporates compatibility between technologies and discuss how this effects the diffusion. We find some surprising results: in some cases, for one technology to survive the introduction of another, the cost of adopting both technologies must be balanced within a narrow, intermediate range. We also extend our framework to the case of multiple technologies, where we find that a simple model captures the phenomenon of two firms adopting a limited "strategic alliance" to defend against a new, third technology.