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Strategic Experimentation and Disruptive Technological Change

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  • Fabiano Schivardi

    (University of Cagliari)

  • Martin Schneider

    (New York University)

Abstract

This paper studies the diffusion of a new technology that is brought to market while its potential is still uncertain. We consider a dynamic game in which an incumbent and a startup firm improve both a new and a rival old technology while learning about the relative potential of both technologies. The main findings are that (i) risk considerations make incumbents with higher market shares more likely to adopt the new technology and (ii) changes in market power are often preceded by a subpar performance of the new technology. We also show that introducing a better new technology or confronting a worse old technology may hurt the startup firm as its new technology is then adopted earlier by incumbents. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 11 (2008)
Issue (Month): 2 (April)
Pages: 386-412

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Handle: RePEc:red:issued:06-110

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Keywords: Oligopoly; Innovation; Learning; Dynamic games;

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References

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Citations

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Cited by:
  1. Weintraub, Gabriel Y. & Benkard, C. Lanier & Van Roy, Benjamin, 2007. "Computational Methods for Oblivious Equilibrium," Research Papers, Stanford University, Graduate School of Business 1969, Stanford University, Graduate School of Business.
  2. Carlos J.Pérez & Carlos J.Ponce, 2013. "Disruption costs and the choice of technology," ILADES-Georgetown University Working Papers, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines inv292, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  3. Malerba, Franco, 2007. "Innovation and the dynamics and evolution of industries: Progress and challenges," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 25(4), pages 675-699, August.
  4. Mariagiovanna Baccara & Ronny Razin, 2004. "Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights," Levine's Working Paper Archive 122247000000000194, David K. Levine.
  5. Schivardi, F., 1998. "Reallocation and Learning Over the Business Cycle," Papers, Banca Italia - Servizio di Studi 345, Banca Italia - Servizio di Studi.
  6. Horvath, Michael & Schivardi, Fabiano & Woywode, Michael, 2001. "On industry life-cycles: delay, entry, and shakeout in beer brewing," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 19(7), pages 1023-1052, July.
  7. Weintraub, Gabriel Y. & Benkard, C. Lanier & Van Roy, Benjamin, 2007. "Markov Perfect Industry Dynamics with Many Firms," Research Papers, Stanford University, Graduate School of Business 1919r, Stanford University, Graduate School of Business.

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