Flexible versus Dedicated Technology Adoption in the Presence of a Public Firm
We study firms' adoption of flexible technologies in the context of a mixed versus a private duopoly with product differentiation. As opposed to a dedicated technology, a flexible technology allows a firm to become multiproduct or multimarket without bearing additional costs. We find that a configuration where both firms adopt flexible technologies is more likely to arise in equilibrium in the private duopoly. A similar result occurs when both firms use a dedicated technology in the case of almost independent or close substitute products. Privatization of the public firm is socially beneficial in limited circumstances.
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Volume (Year): 74 (2008)
Issue (Month): 4 (April)
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