A Closed Economy Model of Horizontal and Vertical Product Differentiation: The Case of Innovation in Biotechnology
AbstractIn endogenous growth theory models have either increasing or constant ranges of product variety. Developments in modem biotechnology however show cases of increasing, decreasing or constant ranges of product variants. We present a simple endogenous growth model allowing for all of these three cases in one model. Quality weights that are exponential in the index of goods are multiplied to the quantity of goods in a love-of-variety utility function. Consumers prefer not to buy goods which are too expensive relative to their quality. The presence or absence of cumulated knowledge determines whether licensing fees, endogenous fixed costs for and the number of producers and the quantities produced are falling or constant, thereby allowing more or less room for variety in household budgets. Whereas new goods always appear, old goods may be selected away or are even reselected. The case of pure love-of-variety and total creative destruction are limiting cases in this model and cases of decreasing variety or initially increasing and later decreasing variety are additions to the present literature. The highly non-linear dynamics of the model are presented in simulations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.
Volume (Year): 4 (1996)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.tandfonline.com/GEIN20
Find related papers by JEL classification:
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Das, Gouranga Gopal, 2005. "Information age to genetic revolution: Embodied technology transfer and assimilation — A tale of two technologies," MPRA Paper 37250, University Library of Munich, Germany, revised 2006.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.