Technological and Physical Obsolescence and the Timing of Adoption
AbstractI 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 InfoPaper provided by Fundacion BBVA / BBVA Foundation in its series Working Papers with number 201028.
Date of creation: Dec 2005
Date of revision:
Durable goods; obsolescence; adoption; innovation; monopoly.;
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