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The Profitable Suppression of Inventions: Technology Choice and Entry Deterrence

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  • Anthony Creane
  • Kaz Miyagiwa

Abstract

AT&T was known for both funding a world-class research lab and delaying deployment of useful innovations from the lab. To explain this behavior we consider a model with an incumbent facing a potential entrant. The incumbent can choose from two technologies for production: old and new. The entrant's choice is limited to the old. We show that, under correlated production uncertainty, use of the common technology exposes the entrant to a greater risk. Therefore, the incumbent may suppress a newer, more efficient technology in favor of the old as a means to deter entry.

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  • Anthony Creane & Kaz Miyagiwa, 2007. "The Profitable Suppression of Inventions: Technology Choice and Entry Deterrence," ISER Discussion Paper 0702, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0702
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2007/DP0702.pdf
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    References listed on IDEAS

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