Date: Thu, 18 Nov 1999 10:16:02 -0800 From: "David Schwartz" <davids@webmaster.com> To: "Jonathon McKitrick" <jcm@dogma.freebsd-uk.eu.org>, "Craig Harding" <crh@outpost.co.nz> Cc: "Terry Lambert" <tlambert@primenet.com>, <chat@freebsd.org> Subject: RE: Judge: "Gates Was Main Culprit" Message-ID: <001301bf31f0$f8ce87a0$021d85d1@youwant.to> In-Reply-To: <Pine.BSF.4.02A.9911181427120.301-100000@dogma.freebsd-uk.eu.org>
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> Since you seem to have a clear picture (pardon the pun) of this whole > debate, could you explain whether the salient points from this discussion > can support the premises we have been debating? Is it possible for > company to cause the adoption of lesser technology purely by > business/marketing tactics? What *really* was responsible for the success > of BetaMax over VHS? Personally, I don't think it's worth getting too deep into this particular example. But I think there is an important lesson about lock-in to be taken from it. Certainly, the economic theory of lock in is correct. If you accept a particular set of assumptions, the conclusion that the market can get 'locked in' to an inferior technology is inescapable. But the theory doesn't just tell us what the conclusion is, it also tells us what circumstances are necessary to find lock in. So the question becomes, how well do the assumptions correlate with actual market conditions? The better they correlate, the more cases of lock in we should be able to find. I'm of the belief that the assumptions exclude everything smart people could do to avoid lock in. And if there are no smart people who can do something avoid lock in, then lock in is not an inefficiency. (The existence of a better choice is not proof of market inefficiency any more than not picking the winning lottery numbers is 'inefficient' simply because it is thoeretically possible that you might have picked the winners.) So, if the theory is correct, where are the cases of lock in? It's interesting that _every_ alleged case of market lock in is suspicious under close analysis. That isn't to say that the outcome in every case is the absolute possible best that it could have been -- we don't live in a fantasy world. We should all be able to agree, I hope, that the case of lock in in the Betamax versus VHS case is questionable at best. Experts at the time did not universally feel that Betamax's quality was better. VHS had a longer recording time. In addition, the precursors/requirements that the lock in theory requires were not clearly present in this market. For example, many of the early purchasers of both VHS and Betamax had little intention of exchanging tapes with _anyone_, they were simply interested in building their own libraries and timeshifting. And there is no evidence of superior marketing on either side, that was a 'forced fact', invented out of whole cloth to explain a 'surprising' outcome. And, again, there is no evidence of any market inefficiency in this case. If we all benefit from having the same format, then we all _should_ have it. And if it's too much of a pain and expense for us all to throw away our VHS recorders and buy Betamaxes, then we shouldn't do so. This is not market inefficiency, this is a case of a 'superior' technology at best not really being superior when you consider the costs of adopting it. And the funny thing is, much like the standard keyboard versus the DSK keyboard, it takes the advocates of lock in about five years to admit that their example shows the opposite of what they claim it shows and find a new one. I wish them better luck this time. I can't prove the negative proposition that there are no cases of lock in that indicate market inefficiency. But if it's taken this long to find any, despite intense efforts to find one, then it must be a truly fair phenomenon, and certainly not one worth basing any public policy on. DS To Unsubscribe: send mail to majordomo@FreeBSD.org with "unsubscribe freebsd-chat" in the body of the message
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