AT&T was known for both funding a world-class research lab and delaying deployment of useful innovations from the lab. To explain this behavior we consider a model with an incumbent facing a potential entrant. The incumbent can choose from two technologies for production: old and new. The entrant's choice is limited to the old. We show that, under correlated production uncertainty, use of the common technology exposes the entrant to a greater risk. Therefore, the incumbent may suppress a newer, more efficient technology in favor of the old as a means to deter entry.
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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number
0702.
For technical questions regarding this item, or to correct its listing, contact: (Fumiko Matsumoto).
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