echnical Fear or being incompatible ca Both switching N lead to the inferior Nash Equilibrium neither firm switches because it to the new ayin technolog thinks the other won't switc s a old supenor technolog Nash yis a Firm 2 Nash s Inertia Old New Equilibri Technolog Technolog Old echnolog 5,4) (2,2) irm 1 ew (1,5) (6,7) Technolog11 Competition and Technical Compatibility Firm 1 Old Technolog y Old Technolog y New Technolog y (5,4) (2, 2) (1, 5) The fight over compatibility can lead to poor technical choices overall New Technolog y Firm 2 (6,7) Excess Inertia Two possible problems: Excess Inertia and Excess Momentum Both staying with the old technolog y is a Nash Equilibriu m Both switching to the new technology is a superior Nash Equilibrium Fear of being incompatible can lead to the inferior Nash Equilibrium— neither firm switches because it thinks the other won’t switch