Nudging mechanisms for technology adoption

We study the adoption dynamics of two competing technologies and the efficacy of viral pricing strategies for driving adoption. Our model considers two incompatible technologies of differing quality and a market in which user valuations are heterogeneous and subject to network effects. We provide partial characterization results about the structure and robustness of equilibria and give conditions under which the higher quality technology purveyor can make significant inroads into the competitor's market share. We then show that myopic best-response dynamics in our setting are monotonic and convergent, and propose two pricing mechanisms that use this insight to help the entrant technology seller tip the market in its favor. Comparable implementations of both mechanisms reveals that the non-discriminatory strategy, based on a calculated public price subsidy, is less costly and just as effective as a discriminatory policy.