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Temporary and permanent technology lock-ins in the quality-differentiated Bertrand competition

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  • Bondarev, Anton
  • Krysiak, Frank C.

Abstract

We consider a setting where strategic behavior of r&d firms can lead to different types of a technology lock-in, permanent or temporary, in an eventually inferior technology. The simple setting with one incumbent and one potential entrant may lead to a wide variety of possible strategic regimes. We study conditions on relative market strength of the incumbent and the entrant which lead to different strategic actions and demonstrate, that such a strategic behavior is not always socially suboptimal, since it may lead to faster development of the existing technology due to persistent threat of the potential entrant. We further elaborate on the selection of support tools which may induce the development of new technology in the second-best world and establish criteria for these tools to be social welfare improving ones.

Suggested Citation

  • Bondarev, Anton & Krysiak, Frank C., 2017. "Temporary and permanent technology lock-ins in the quality-differentiated Bertrand competition," Working papers 2017/09, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2017/09
    as

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    References listed on IDEAS

    as
    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Krysiak, Frank C., 2011. "Environmental regulation, technological diversity, and the dynamics of technological change," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 528-544, April.
    3. Bondarev, Anton, 2014. "Endogenous specialization of heterogeneous innovative activities of firms under the technological spillovers," Journal of Economic Dynamics and Control, Elsevier, vol. 38(C), pages 235-249.
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    5. Unruh, Gregory C., 2002. "Escaping carbon lock-in," Energy Policy, Elsevier, vol. 30(4), pages 317-325, March.
    6. Hinloopen, Jeroen & Smrkolj, Grega & Wagener, Florian, 2013. "From mind to market: A global, dynamic analysis of R&D," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2729-2754.
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    8. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
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    More about this item

    Keywords

    technology lock-in; technological change; strategic interaction; r&d policy; multiple regimes;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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