Bandwagon Effects in High Technology Industries

Economists use the term "bandwagon effect" to describe the benefit a
consumer enjoys as a result of others' using the same product or service. The
history of videocassettes offers a striking example of the power of bandwagon
effects. Originally there were two technical standards for videocassettes in the
United States: Beta and VHS. Beta was widely regarded to have better picture
quality, but VHS could record longer television programs. Eventually the selection
of Beta cassettes shrank to zero, leaving consumers no choice but to get on the VHS
bandwagon. The most successful bandwagon, apart from telephone service, is the
Internet.In this book Jeffrey Rohlfs shows how the dynamics of bandwagons differ
from those of conventional products and services. They are difficult to get started
and often fail before getting under way. A classic example of a marketing failure is
the Picturephone, introduced by the Bell System in the early 1970s. Rohlfs describes
the fierce battles waged by competitors when new services are introduced, as well as
cases of early agreement on a single technical standard, as with CDs and CD players.
He also discusses the debate among economists and policy analysts over the
advantages and disadvantages of having governments set technical standards. The case
studies include fax machines, telephones, CD players, VCRs, personal computers,
television, and the Internet.