Monday, January 21, 2013
Posted by D. Daniel Sokol
Stan J. Liebowitz (UT Dallas) and Stephen E. Margolis (NC State) discuss THE TROUBLED PATH OF THE LOCK-IN MOVEMENT.
ABSTRACT: Paul David (in his article “Clio and the Economics of QWERTY”), Brian Arthur (in his article “Competing Technologies, Increasing Returns, and Lock-In by Historical Events”), and others introduced a “new economics” of increasing returns, alleging problems of path dependence and lock-in. These conditions were claimed to constitute market failure and were soon featured in antitrust actions, most famously in Microsoft. We challenged the empirical support for these theories and their real-world applicability (in the articles “The Fable of the Keys” and “Network Externality: An Uncommon Tragedy”). Subsequently, David and others have responded, arguing that lock-in theories require no empirical support, market failures were never an important feature of their writings, and the empirical evidence that had been put forward was never meant to be taken literally. Nevertheless, David and others claim that their theories have policy significance. Indeed, lock-in claims continue to appear as a basis for antitrust action. We now respond to the responses of David and others, review new developments in this literature, and consider antitrust implications in light of the deficiencies in lock-in theories and related empirical work.