Illustration
Consider as an example the videotape format war; Two mechanisms independent of product quality could explain how VHS achieved dominance over Betamax from a negligible early adoption lead:
- A network effect: videocassette rental stores observed more VHS rentals and stocked up on VHS tapes, leading renters to buy VHS players and rent more VHS tapes, until there was complete vendor lock-in.
- A VCR manufacturer bandwagon effect of switching to VHS-production because they expected it to win the standards battle.
An alternative analysis is that VHS was better adapted to market demands (e.g. having a longer recording time). In this interpretation, path dependence had little to do with VHS's success, which would have occurred even if Betamax had established an early lead.
Positive feedback mechanisms like bandwagon and network effects are at the origin of path-dependence. They lead to a reinforcing pattern, in which industries 'tip' towards one or another product design. Uncoordinated standardisation can be observed in many other situations.
Read more about this topic: Path Dependence
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