Technology Selection with Peer-Based Network Effects

In the transition to zero-emission freight transport, the adoption of sustainable technologies is challenging and often leaves decision-makers indecisive. This paper sheds light on how peer-based network effects can influence the technology selection process. Using a game-theoretic approach, we model the strategic interaction between companies as a technology selection game in which the individual pay-off functions explicitly depend on the behavior of peers. Central to equilibrium behavior is a new concept of individual critical masses, which provides individual and technology-based thresholds at which players adopt a certain technology depending on how many peers are choosing that same technology. We show that in equilibrium, the individual critical mass should match the corresponding expected mass. We illustrate that identifying these peer-based dynamics is crucial in overcoming the barriers to adopt sustainable technologies.