Answer to Question #71741 in Macroeconomics for Kerolos

Question #71741
A prime example of the negatives effectives of "Path Dependency" is the QWERTY keyboard layout, which persists in usage despite there being far more efficient ways to organize a keyboard. Path Dependency can also be used to maintain a sustainable competitive advantage. Identify a firm and product, other than Apple, that has used path dependency to its advantage and discuss how this was accomplished. Use Microsoft as the company.
Expert's answer
Path dependence theory was originally developed by economists to explain technology adoption processes and industry evolution.
In the computer and software markets, legacy systems indicate path dependence: customers' needs in the present market often include the ability to read data or run programs from past generations of products. Thus, for instance, a customer may need not merely the best available word processor, but rather the best available word processor that can read Microsoft Word files. Such limitations in compatibility contribute to lock-in, and more subtly, to design compromises for independently developed products, if they attempt to be compatible.

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