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The Impact of Competition on Technology Adoption: An Apples-to-PCs Analysis

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  • Adam Copeland
  • Adam Hale Shapiro

    (Bureau of Economic Analysis)

Abstract

We study the effect of market structure on a firm's decision to adopt a new tech- nology in the personal computer industry. This industry is unusual because there exists two horizontally segmented retail markets with different degrees of competition: the IBM compatible (or \PC") platform and the Apple platform. We first document that relative to Apple, producers of PCs have more frequent technology adoption, shorter product cycles, and steeper price declines over the product cycle. We then develop a parsimonious vintage-capital model which matches prices and sales of PC and Apple products. The model predicts that competition is the key driver of the rate at which technology is adopted.

Suggested Citation

  • Adam Copeland & Adam Hale Shapiro, 2010. "The Impact of Competition on Technology Adoption: An Apples-to-PCs Analysis," BEA Working Papers 0063, Bureau of Economic Analysis.
  • Handle: RePEc:bea:wpaper:0063
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    References listed on IDEAS

    as
    1. Johannes Van Biesebroeck & Aamir Hashmi, 2007. "Market Structure and Innovation: A Dynamic Analysis of the Global Automobile Industry," 2007 Meeting Papers 362, Society for Economic Dynamics.
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    7. Ariel Pakes, 2003. "A Reconsideration of Hedonic Price Indexes with an Application to PC's," American Economic Review, American Economic Association, vol. 93(5), pages 1578-1596, December.
    8. Aamir Rafique Hashmi & Johannes Van Biesebroeck, 2016. "The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 192-208, March.
    9. Kristopher S. Gerardi & Adam Hale Shapiro, 2009. "Does Competition Reduce Price Dispersion? New Evidence from the Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 1-37, February.
    10. Tim Erickson & Ariel Pakes, 2011. "An Experimental Component Index for the CPI: From Annual Computer Data to Monthly Data on Other Goods," American Economic Review, American Economic Association, vol. 101(5), pages 1707-1738, August.
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    Cited by:

    1. Dae-Hwan Kim & Matarr O. Sambou & Moo-Sup Jung, 2016. "Does Technology Transfer Help Small and Medium Companies? Empirical Evidence from Korea," Sustainability, MDPI, Open Access Journal, vol. 8(11), pages 1-13, November.
    2. Rui Castro & Gian Luca Clementi & Yoonsoo Lee, 2015. "Cross Sectoral Variation in the Volatility of Plant Level Idiosyncratic Shocks," Journal of Industrial Economics, Wiley Blackwell, vol. 63(1), pages 1-29, March.
    3. Slivko, Olga, 2012. "Direct and indirect subsidies in markets with system goods in the presence of externalities. Preliminary version," Working Papers 2072/211631, Universitat Rovira i Virgili, Department of Economics.
    4. Adam Hale Shapiro & Ana Aizcorbe, 2010. "Implications of Consumer Heterogeneity on Price Measures for Technology Goods," BEA Working Papers 0062, Bureau of Economic Analysis.

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    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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