Old Technology Upgrades, Innovation, and Competition in Vertically Differentiated Markets
AbstractWe study how the migration from an old to a new technology is affected by the access price to the old technology. We show that both the incumbent and the regulator are willing to set a very high access price to accelerate consumers' migration to the new technology. When the quality of the old technology is exogenous and the entrant dominates investment in the new technology, the old technology is completely switched off in equilibrium, whereas the old technology persists when the incumbent dominates investment. When the incumbent can decide on an endogenous upgrade of the old technology, the migration to the new technology is slowed down, and the entrant might be foreclosed.
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Bibliographic InfoPaper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0158.
Length: 39 pages
Date of creation: Feb 2013
Date of revision:
Access; Investment; Vertical differentiation; Multi-product firms. JEL Codes: L1; L51; L96.;
Find related papers by JEL classification:
- Mul - Business Administration and Business Economics; Marketing; Accounting - - - - -
- fir - - - - - -
- JEL - Labor and Demographic Economics - - - - -
- Cod - Mathematical and Quantitative Methods - - - - -
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-20 (All new papers)
- NEP-COM-2013-04-20 (Industrial Competition)
- NEP-CSE-2013-04-20 (Economics of Strategic Management)
- NEP-INO-2013-04-20 (Innovation)
- NEP-TID-2013-04-20 (Technology & Industrial Dynamics)
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