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Perpetual Leapfrogging in Bertrand Duopoly

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  • Giovannetti, E.

Abstract

We consider different patterns of infinite technological adoption choices by firms in a Bertran duopoly. Every period, technological progress provides a sequence of cost reducing innovations. The equilibrium concept is Markov Perfect Equilibrium. We analyse conditions for which equilibrium adoption leads to persistent leadership and those where firms alternate in adoption inducing leapfrogging. Only leapfrogging leads to technological improvement in the long run. Demand conditions play a crucial role in determining whether leapfrogging can be perpetual in Bertrand duopoly.

Suggested Citation

  • Giovannetti, E., 2000. "Perpetual Leapfrogging in Bertrand Duopoly," Cambridge Working Papers in Economics 0012, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:0012
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    References listed on IDEAS

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    1. Kapur, Sandeep, 1995. "Technological Diffusion with Social Learning," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 173-195, June.
    2. Jennifer F. Reinganum, 1985. "Innovation and Industry Evolution," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 81-99.
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    4. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
    5. Christopher Budd & Christopher Harris & John Vickers, 1993. "A Model of the Evolution of Duopoly: Does the Asymmetry between Firms Tend to Increase or Decrease?," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 543-573.
    6. Kapur, Sandeep, 1995. "Markov perfect equilibria in an N-player war of attrition," Economics Letters, Elsevier, vol. 47(2), pages 149-154, February.
    7. Christopher Harris & John Vickers, 1985. "Perfect Equilibrium in a Model of a Race," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 193-209.
    8. Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 1-21.
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    Cited by:

    1. Alfredo Garcia & Barry Horowitz, 2007. "The potential for underinvestment in internet security: implications for regulatory policy," Journal of Regulatory Economics, Springer, vol. 31(1), pages 37-55, February.
    2. repec:eee:eecrev:v:101:y:2018:i:c:p:297-329 is not listed on IDEAS
    3. Fedor Iskhakov & John Rust & Bertel Schjerning, 2013. "The Dynamics of Bertrand Price Competition with Cost-Reducing Investments," Discussion Papers 13-05, University of Copenhagen. Department of Economics.
    4. Furukawa, Yuichi & Takarada, Yasuhiro, 2013. "Technological change and international interaction in environmental policies," MPRA Paper 44047, University Library of Munich, Germany.
    5. Yuichi Furukawa, 2015. "Leapfrogging cycles in international competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(2), pages 401-433, June.
    6. Furukawa, Yuichi, 2012. "Perpetual leapfrogging in international competition," MPRA Paper 40126, University Library of Munich, Germany, revised Jul 2012.
    7. Lee, Jeongsik & Kim, Byung-Cheol & Lim, Young-Mo, 2011. "Dynamic competition in technological investments: An empirical examination of the LCD panel industry," International Journal of Industrial Organization, Elsevier, vol. 29(6), pages 718-728.
    8. James G. Mulligan & Nilotpal Das, 2005. "Persistent Adoption of Time-Saving Process Innovations," Working Papers 05-03, University of Delaware, Department of Economics.
    9. Giovannetti, Emanuele & Piga, Claudio A., 2017. "The contrasting effects of active and passive cooperation on innovation and productivity: Evidence from British local innovation networks," International Journal of Production Economics, Elsevier, vol. 187(C), pages 102-112.

    More about this item

    Keywords

    Strategic technology adoption; Leapfrogging; Markov perfect equilibrium;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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