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Technological and Physical Obsolescence and the Timing of Adoption

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  • Caminal Echeverria Ramón

    ()
    (INSTITUTE FOR ECONOMIC ANALYSIS (CSIC) CENTER FOR ECONOMIC POLICY RESEARCH)

Abstract

I study the relative role of technological and physical obsolescence in the determination of the timing of adoption and the monopolist s incentives to innovate. I show that depreciation of durable goods (physical obsolescence) makes decisions about the timing of adoption non-trivial. If the monopolist cannot perfectly restrict the timing of purchases (using purchase deadlines, trade-in allowances, etc.) then its optimal pricing policy will inefficiently delay adoption, which in turn will reduce the incentives to innovate.

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Bibliographic Info

Paper provided by Fundacion BBVA / BBVA Foundation in its series Working Papers with number 201028.

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Length: 46
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:fbb:wpaper:201028

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Keywords: Durable goods; obsolescence; adoption; innovation; monopoly.;

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