AbstractThe usual explanation for why the producers of a given product use different technologies involves "vintage-capital": A firm understands the frontier technology, but can still prefer an older, less efficient technology in which it has made specific physical and human capital investments. This paper develops an alternative. "information-barrier" hypothesis: Firms differ in the technologies they use because it is costly for them to overcome the informational barriers that separate them. The paper endogenizes both innovative and imitative effort. The industry life-cycle implications -- declining price and increasing output -- broadly agree with the Gort-Klepper data. Empirically, the paper focuses on the slow spread of Diesel locomotives, which can not be explained by the vintage-capital hypothesis alone. For instance, contrary to that hypothesis, railroads were buying new steam locomotives long after the Diesel first came into use -- exactly as the information-barrier hypothesis would imply.
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Bibliographic InfoPaper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 160.
Length: 63 pages
Date of creation: 1988
Date of revision:
Contact details of provider:
Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.
economic models ; innovations ; research and development ; railways ; coal mining;
Other versions of this item:
- Macdonald, G.M., 1988. "Competitive Diffusion," University of Chicago - Economics Research Center 88-10, Chicago - Economics Research Center.
- Boyan Jovanovic & Glenn MacDonald, 1994. "Competitive Diffusion," NBER Working Papers 4463, National Bureau of Economic Research, Inc.
- Jovanovic, Boyan & MacDonald, Glenn M., 1988. "Competitive Diffusion," Working Papers 88-29, C.V. Starr Center for Applied Economics, New York University.
- Jovanovic, B. & MacDonald, G.M., 1991. "Competitive Diffusion," Papers 92-08, Rochester, Business - Financial Research and Policy Studies.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andolfatto, D. & MacDonald, G.M., 1995. "Endogeneous Technological Change, Growth, and Aggregate Functions," Working Papers 9504, University of Waterloo, Department of Economics.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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"Endogenous Technological Change,"
NBER Working Papers
3210, National Bureau of Economic Research, Inc.
- Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December.
- Bengt Holmstrom, 1982.
"Moral Hazard in Teams,"
Bell Journal of Economics,
The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
- Jovanovic, Boyan & Rob, Rafael, 1989. "The Growth and Diffusion of Knowledge," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 569-82, October.
- Karl Shell, 2010. "A Model of Inventive Activity and Capital Accumulation," Levine's Working Paper Archive 1409, David K. Levine.
- Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
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