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Perpetual Leapfrogging in Bertrand Duopoly

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Author Info
Giovannetti, E.

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Abstract

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

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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0012.

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Date of creation: Nov 2000
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Handle: RePEc:cam:camdae:0012

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Related research
Keywords: Strategic technology adoption; Leapfrogging; Markov perfect equilibrium;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

References listed on IDEAS
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  1. Kapur, Sandeep, 1995. "Technological Diffusion with Social Learning," Journal of Industrial Economics, Blackwell Publishing, vol. 43(2), pages 173-95, June. [Downloadable!] (restricted)
  2. Harris, Christopher & Vickers, John, 1987. "Racing with Uncertainty," Review of Economic Studies, Blackwell Publishing, vol. 54(1), pages 1-21, January. [Downloadable!] (restricted)
  3. Kapur, Sandeep, 1995. "Markov perfect equilibria in an N-player war of attrition," Economics Letters, Elsevier, vol. 47(2), pages 149-154, February. [Downloadable!] (restricted)
  4. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March. [Downloadable!] (restricted)
  5. Reinganum, Jennifer F, 1985. "Innovation and Industry Evolution," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 81-99, February. [Downloadable!] (restricted)
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  6. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!] (restricted)
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