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R&D And Buyers' Waiting Option

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  • EIRIK GAARD KRISTIANSEN

Abstract

Anticipation of technological progress may induce buyers to delay the adoption of new technologies. We analyze how buyers' waiting option may feed back into firm's timing of innovations. Buyers are shown to have inefficiently weak incentives to wait for potentially better products. This induces firms to accelerate the introduction of new products. Furthermore, buyers' inclination to adopt new technologies prematurely expands firms' scope for preemption of potential rivals. The analysis sheds light on R&D competition in durable goods markets such as the market for aircraft.

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  • Eirik Gaard Kristiansen, 2006. "R&D And Buyers' Waiting Option," Journal of Industrial Economics, Wiley Blackwell, vol. 54(1), pages 31-42, March.
    • Handle: RePEc:bla:jindec:v:54:y:2006:i:1:p:31-42
    DOI: 10.1111/j.1467-6427.2006.00274.x
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    Cited by:

    1. Kamoto, Shinsuke, 2015. "Strategic capacity expansion under a potential entry threat," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 157-177.

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