Are dominant designs good for consumers? Competitors? Complementors? Suppliers?
The level of market share is one of the factors which determine if an industry is likely to have one or few dominant designs. If consumers’ network externality needs are met at low levels of market share, then more than one dominant design may be developed. Similarly, if consumers’ network externality needs are met at high levels of market share, then more than fewer dominant designs are developed. Another key factor is the path dependency that affects the trajectory of technology development that, in turn, impacts the number of dominant designs. Also, sponsorship of technology by a powerful firm. Under this factor, helping the technology attain a controlling share of the market that locks out alternative technologies, thus leading to the development of one dominant design.
- Are dominant designs good for consumers? Competitors? Complementors? Suppliers?
Dominant designs are good for consumers if the benefits accrued by consumers through the widespread adoption of technologies outweigh the cost associated with a monopoly. But, they are not good for consumers if the benefits realized do not outweigh the costs. Dominant designs are also good for consumers since they contain open technology, which is not protected by an intellectual property right. This situation facilitates effective interaction between competitors. Dominants are also good for suppliers and complementors since these designs can eliminate the costs associated with supporting multiple competing technologies. Therefore, suppliers and complementors do not waste resources while developing other platforms which cannot also thrive in an expanded market. However, a single dominant design is not appropriate for suppliers and complementors. Such design disfavors suppliers and complementors by reducing their powers in the market.
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Responses
Student 1
Halo,
Your piece is very insightful and detailed. You have tackled all your questions very well. I like the way, for instance, you have tackled question number four. The concept of dominant designs is one of the issues that affect many markets and firms. However, very few people have proper knowledge about this concept. Nevertheless, you have shed adequate light, especially in explaining the key factors which determine if an industry should have one or a few dominant designs. I agree with you that market share should be enlisted among the key factors. I also concur with you when you mention the issue of government involvement as a critical factor.
Besides, you have also handled question number five in a great way. Dominant designs are indeed good for consumers, but it depends on how they can meet consumer needs. I also believe that these dominant designs can be inappropriate for competitors due to the lack of similar technology to the one that created the dominant design. Your argument that dominant designs are good for complementors and suppliers is also valid. I like the way you have stated that these designs help in focusing on resources as the reason for their effectiveness.
Student 2
Hi,
Your post is just superb. You have raised pertinent issues and arguments which I have found to be very valid and which hold much weight. You have answered question number two in a great way. Your answer states that medicine or the pharmaceutical industry is one of the sectors not mentioned in the chapter, but which demonstrate increasing returns to adoption. You have also given a very elaborate argument to support your answer to this question. It is true that as a new drug is developed and becomes effective, it also gains value. As a result, returns to adoption are increased.
Your response to question number five is also well-thought. The information and details you have presented in this section are credible and found. I concur with you that early entrants and technology changes are some of the factors which determine whether an industry is likely to have one or few dominant designs.
