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Concept
Path dependence
Summary
Path dependence is a concept in the social sciences, referring to processes where past events or decisions constrain later events or decisions. It can be used to refer to outcomes at a single point in time or to long-run equilibria of a process. Path dependence has been used to describe institutions, technical standards, patterns of economic or social development, organizational behavior, and more.
In common usage, the phrase can imply two types of claims. The first is the broad concept that "history matters", often articulated to challenge explanations that pay insufficient attention to historical factors. This claim can be formulated simply as "the future development of an economic system is affected by the path it has traced out in the past" or "particular events in the past can have crucial effects in the future." The second is a more specific claim about how past events or decisions affect future events or decisions in significant or disproportionate ways, through mechanisms such as increasing returns, positive feedback effects, or other mechanisms.
The videotape format war is a key example of path dependence. Three 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.
Sony, the original developer of Betamax, did not let pornography companies license their technology for mass production, which meant that nearly all pornographic motion pictures released on video used VHS format.
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.
Official source
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