Adoptions and Orphans in the Early Microcomputer Market:

In this paper we develop a model with (1) differentiated consumers, (2) endogenous adoption times, (3) technical uncertainty, and (4) alternative technologies sponsored by competing vendors. We identify conditions under which orphaning arises endogenously in a framework of dynamic competition. We then use the model to examine the development of the microcomputer market in the early 1980s, when the orphaning of a widely-adopted operating system occurred. We find that the data characterizing this event are consistent with our theoretical framework. JEL Classification Numbers: L86, O33. We are grateful to Richard Arnott, Tim Bresnahan, Francesca Cornelli, Gregory Duncan, Raphael Rob, Yishai Yafeh and seminar participants at the 1994 Winter Econometric meetings, the University of Pennsylvania, and INSEAD for helpful comments. We received outstanding research assistance from Subhendu Roy and Susan McMaster. Greenstein would like to acknowledge partial funding from NSF IRI-92-09321. Please address all correspondence to David Salant, Principle Member Technical Staff, GTE Laboratories Incorporated, Waltham, MA 02254.