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Strategic Experimentation and Disruptive Technological Change

  • Schivardi, Fabiano
  • Schneider, Martin

This paper studies the diffusion of a new technology that is brought to market while its potential is still uncertain. We consider a dynamic game in which firms improve both a new and a rival old technology while learning about the relative potential of both technologies. We use the model to understand historical evidence on diffusion and market structure. In particular, the model explains why a change in market leadership often goes along with slow diffusion. It also provides a rational explanation for observed ‘incumbent inertia’ and shows how markets can make mistakes in the selection of new technologies.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4925.

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Date of creation: Feb 2005
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Handle: RePEc:cpr:ceprdp:4925
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  9. Harris, Christopher & Howitt, Peter & Vickers, John & Aghion, Philippe, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Scholarly Articles 12375013, Harvard University Department of Economics.
  10. Bhattacharya, Sudipto & Chatterjee, Kalyan & Samuelson, Larry, 1986. "Sequential Research and the Adoption of Innovations," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 219-43, Suppl. No.
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  12. Karshenas, Massoud & Stoneman, Paul, 1990. "Rank, Stock, Order And Epidemic Effects In The Diffusion Of New Process Technologies : An Empirical Model," The Warwick Economics Research Paper Series (TWERPS) 358, University of Warwick, Department of Economics.
  13. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
  14. Aaron Tornell, 1997. "Rational Atrophy: The U.S. Steel Industry," Harvard Institute of Economic Research Working Papers 1806, Harvard - Institute of Economic Research.
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  17. Iansiti, Marco & Khanna, Tarun, 1995. "Technological Evolution, System Architecture and the Obsolescence of Firm Capabilities," Industrial and Corporate Change, Oxford University Press, vol. 4(2), pages 333-61.
  18. David Besanko & Ulrich Doraszelski, 2002. "Capacity Dynamics and Endogenous Asymmetries in Firm Size," Computing in Economics and Finance 2002 196, Society for Computational Economics.
  19. Kevin F. McCardle, 1985. "Information Acquisition and the Adoption of New Technology," Management Science, INFORMS, vol. 31(11), pages 1372-1389, November.
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  21. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
  22. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  23. Jensen, Richard, 1982. "Adoption and diffusion of an innovation of uncertain profitability," Journal of Economic Theory, Elsevier, vol. 27(1), pages 182-193, June.
  24. Aghion, Philippe, et al, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 467-92, July.
  25. Budd, Christopher & Harris, Christopher & Vickers, John, 1993. "A Model of the Evolution of Duopoly: Does the Asymmetry between Firms Tend to Increase or Decrease?," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 543-73, July.
  26. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
  27. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
  28. 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.
  29. Harris, Christopher & Vickers, John, 1987. "Racing with Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 1-21, January.
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