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Technological and Physical Obsolescence and the Timing of Adoption

Author

Listed:
  • 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.

Suggested Citation

  • Caminal Echeverria Ramón, 2005. "Technological and Physical Obsolescence and the Timing of Adoption," Working Papers 201028, Fundacion BBVA / BBVA Foundation.
    • Handle: RePEc:fbb:wpaper:201028
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