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Competitive Diffusion

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  • Jovanovic, Boyan
  • MacDonald, Glenn M

Abstract

This paper studies the evolution of a competitive industry in which a fixed number of firms reduce costs by innovating and by imitating their rivals' technologies. As the firms' technologies gradually improve, industry output expands and price falls. Technological leaders tend to rely on innovations to reduce their costs, whereas the laggards rely more on imitation. Imitation causes technology to spread from the leaders to the followers and forces some convergence of technology among firms as the industry matures. This convergence is accompanied by faster growth of smaller firms and a consequent tightening of the distribution of output over firms. Copyright 1994 by University of Chicago Press.

Suggested Citation

  • Jovanovic, Boyan & MacDonald, Glenn M, 1994. "Competitive Diffusion," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 24-52, February.
    • Handle: RePEc:ucp:jpolec:v:102:y:1994:i:1:p:24-52
    DOI: 10.1086/261920
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    References listed on IDEAS

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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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