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Concept
Vendor lock-in
Summary
In economics, vendor lock-in, also known as proprietary lock-in or customer lock-in, makes a customer dependent on a vendor for products, unable to use another vendor without substantial switching costs.
The use of open standards and alternative options makes systems tolerant of change, so that decisions can be postponed until more information is available or unforeseen events are addressed. Vendor lock-in does the opposite: it makes it difficult to move from one solution to another.
Lock-in costs that create barriers to market entry may result in antitrust action against a monopoly.
Monopolistic Whether a single vendor controls the market for the method or technology being locked in to. Distinguishes between being locked to the mere technology, or specifically the vendor of it.
This class of lock-in is potentially technologically hard to overcome if the monopoly is held up by barriers to market that are nontrivial to circumvent, such as patents, secrecy, cryptography or other technical hindrances.
Collective Whether individuals are locked in collectively, in part through each other. Economically, there is a cost to resist the locally dominant choice, as if by friction between individuals. In a mathematical model of differential equations, disregarding discreteness of individuals, this is a distributed parameter system in market share, applicable for modeling by partial differential equations, for example the heat equation.
This class of lock-in is potentially inescapable to rational individuals not otherwise motivated, by creating a prisoner's dilemma—if the cost to resist is greater than the cost of joining, then the locally optimal choice is to join—a barrier that takes cooperation to overcome. The distributive property (cost to resist the locally dominant choice) alone is not a network effect, for lack of any positive feedback; however, the addition of bistability per individual, such as by a switching cost, qualifies as a network effect, by distributing this instability to the collective as a whole.
Official source
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