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The speed of technological adoption under price competition: two-tier vs. one-tier industries

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Author Info

  • Maria Alipranti

    ()
    (University of Crete)

  • Emmanuel Petrakis

    ()
    (Department of Economics, University of Crete, Greece)

Abstract

The present paper examines the firms' incentives to adopt a new cost reducing technology in vertically related markets, as well as, the effects of the vertical relations on the firms' timing of adoption. It demonstrates that in vertically related industries, independently of the upstream market structure (either upstream separate firms or upstream monopoly), downstream firms always have strong incentives to adopt the new technology, while in equilibrium there is technology diffusion. Further, comparing the speed of the firms' technology adoption in one-tier and two-tier industries, we show that, independently of the upstream market structure, technology adoption may occurs earlier in two-tier than in one-tier industries depending on the intensity of the final market competition, the drasticity of the new technology and the bargaining power distribution in the market.

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File URL: http://economics.soc.uoc.gr/wpa/docs/Techn_Adoption_52013.pdf
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Bibliographic Info

Paper provided by University of Crete, Department of Economics in its series Working Papers with number 1307.

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Length: 46 pages
Date of creation: 01 Dec 2012
Date of revision: 08 May 2013
Handle: RePEc:crt:wpaper:1307

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Keywords: Technology adoption; Vertical relations; Two-part tariffs; Product Differentiation;

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References

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  1. Patrick Rey & Thibaud Vergé, 2003. "Bilateral Control with Vertical Contracts," Industrial Organization 0309005, EconWPA.
  2. Chrysovalantou Milliou & Emmanuel Petrakis, 2009. "Timing of Technology Adoption and Product Market Competition," CESifo Working Paper Series 2686, CESifo Group Munich.
  3. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  4. Catherine C. de Fontenay & Joshua S. Gans, 2005. "Vertical Integration in the Presence of Upstream Competition," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 544-572, Autumn.
  5. Susan Helper, 1995. "Supplier Relations and Adoption of New Technology: Results of Survey Research in the U.S. Auto Industry," NBER Working Papers 5278, National Bureau of Economic Research, Inc.
  6. Lane, Sarah J, 1991. "The Determinants of Investment in New Technology," American Economic Review, American Economic Association, vol. 81(2), pages 262-65, May.
  7. Milliou, Chrysovalantou & Petrakis, Emmanuel, 2007. "Upstream horizontal mergers, vertical contracts, and bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 963-987, October.
  8. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-30, March.
  9. Reinganum, Jennifer R., 1982. "Uncertain Innovation and the Persistence of Monopoly," Working Papers 431, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 383-401, July.
  11. Hendricks, Kenneth, 1992. "Reputations in the adoption of a new technology," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 663-677, December.
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