Now that something approaching 100% of the Internet economy's first-movers have gone bust, this theory looks less plausible. Yet the logic once seemed persuasive. Where exactly did Internet economics go wrong? A new book by Stan Liebowitz, a professor of economics at the University of Texas at Dallas, and a long-time sceptic of the view that the Internet changes all the rules, gives the most thorough answer so far. Re-Thinking the Network Economy
[..] But the crux of the book is two chapters devoted to attacking the theory of lock-in. This was the notion that caused the biggest mistakesand the area where many economists were most at fault.
[..] Strong lock-in is different, because of the network aspect. Strong lock-in means that consumers won't move to a new and much better product unless a lot of others jump first. If they could somehow agree to move together, they would all be better off. But they cannot. Strong lock-in reflects a failure of co-ordination, it causes economic losses, and in theory it does create opportunities for decisive first-mover advantage. But how common is it, even in the new economy? Mr Liebowitz is forthright on this. Strong lock-in is not merely uncommon, he says, there is actually no known instance.
