Product innovation and adoption in market equilibrium: The case of digital cameras
AbstractThis paper studies the effect of competition on product innovation in the market for digital cameras during the years 1998 to 2001. The analysis is based on a structural dynamic model that is estimated and used to simulate the innovation behavior of firms in counterfactual environments. The model features heterogeneous consumers, who time optimally purchase goods, depending on the expected evolution of the prices and the characteristics of available cameras. On the supply side, firms introduce new camera models and choose their characteristics, accounting for the dynamic value of new products and the optimal dynamic behavior of consumers. The counterfactual simulations imply that an increase in competition in the industry would not have generated better products on average and, depending on the type of competition, would have generated products with lower average quality.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 28 (2010)
Issue (Month): 6 (November)
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Web page: http://www.elsevier.com/locate/inca/505551
Durable goods Dynamic demand Innovation;
Other versions of this item:
- Juan Esteban Carranza, 2010. "Product Innovation and Adoption in Market Equilibrium: The Case of Digital Cameras," BORRADORES DE ECONOMÃA Y FINANZAS 007127, UNIVERSIDAD ICESI.
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