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Perpetual Leapfrogging in Bertrand Duopoly

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  • Giovannetti, Emanuele

Abstract

We consider different patterns of infinite technological adoption choices by firms in a Bertrand duopoly. Every period technological progress provides a sequence of cost reducing innovations. The equilibrium concept is Markov perfect equilibrium. We analyze conditions for which equilibrium adoption leads to persistent leadership and those where firms alternate in adoption inducing leapfrogging. Only leapfrogging (cads to technological improvement in the long run. Demand conditions play a crucial role in determining whether leapfrogging can be perpetual in Bertrand duopoly.

Suggested Citation

  • Giovannetti, Emanuele, 2001. "Perpetual Leapfrogging in Bertrand Duopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 671-696, August.
    • Handle: RePEc:ier:iecrev:v:42:y:2001:i:3:p:671-96
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    References listed on IDEAS

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    Cited by:

    1. Ibsen, Alexander Z., 2009. "The politics of airplane production: The emergence of two technological frames in the competition between Boeing and Airbus," Technology in Society, Elsevier, vol. 31(4), pages 342-349.
    2. Fedor Iskhakov & John Rust & Bertel Schjerning, 2018. "The Dynamics Of Bertrand Price Competition With Cost‐Reducing Investments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(4), pages 1681-1731, November.
    3. Alfredo Garcia & Barry Horowitz, 2007. "The potential for underinvestment in internet security: implications for regulatory policy," Journal of Regulatory Economics, Springer, vol. 31(1), pages 37-55, February.
    4. Diodato, Dario & Malerba, Franco & Morrison, Andrea, 2018. "The made-in effect and leapfrogging: A model of leadership change for products with country-of-origin bias," European Economic Review, Elsevier, vol. 101(C), pages 297-329.
    5. Doraszelski, Ulrich & Escobar, Juan F., 2019. "Protocol invariance and the timing of decisions in dynamic games," Theoretical Economics, Econometric Society, vol. 14(2), May.
    6. Balaji Parthasarathy & Yuko Aoyama, 2006. "From Software Services to R&D Services: Local Entrepreneurship in the Software Industry in Bangalore, India," Environment and Planning A, , vol. 38(7), pages 1269-1285, July.
    7. Furukawa, Yuichi & Takarada, Yasuhiro, 2013. "Technological change and international interaction in environmental policies," MPRA Paper 44047, University Library of Munich, Germany.
    8. Yuichi Furukawa, 2015. "Leapfrogging cycles in international competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(2), pages 401-433, June.
    9. Furukawa, Yuichi, 2012. "Perpetual leapfrogging in international competition," MPRA Paper 40126, University Library of Munich, Germany, revised Jul 2012.
    10. Lee, Jeongsik & Kim, Byung-Cheol & Lim, Young-Mo, 2011. "Dynamic competition in technological investments: An empirical examination of the LCD panel industry," International Journal of Industrial Organization, Elsevier, vol. 29(6), pages 718-728.
    11. James G. Mulligan & Nilotpal Das, 2005. "Persistent Adoption of Time-Saving Process Innovations," Working Papers 05-03, University of Delaware, Department of Economics.
    12. Giovannetti, Emanuele & Piga, Claudio A., 2017. "The contrasting effects of active and passive cooperation on innovation and productivity: Evidence from British local innovation networks," International Journal of Production Economics, Elsevier, vol. 187(C), pages 102-112.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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