Disruption costs and the choice of technology
AbstractWe study technology adoption in a dynamic model of price competition. Adoption involves disruption costs and learning by doing. Because of disruption costs, the adopting firm begins in a market disadvantage, which may persist if its rival captures the buyers it needs to learn the technology. The prospect of future rents by rival results in (i) failure to adopt Pareto superior technologies; (ii) an equilibrium preference for the choice of technologies with smaller (discounted) social value but flows payoffs that are received earlier firm is exposed to more competition.
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Bibliographic InfoPaper provided by Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines in its series ILADES-Georgetown University Working Papers with number inv292.
Length: 31 pages
Date of creation: Oct 2013
Date of revision:
Find related papers by JEL classification:
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
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