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Incomplete Adoption of a Superior Innovation

  • Lapan, Harvey E.
  • Moschini, GianCarlo

We consider a model in which an innovating monopolist of a technologically superior intermediate input must sell this product to final output producers. Prior research shows that, with complete information, the monopolist's optimal strategy will lead to complete adoption of this technologically superior innovation. In this article we show that, when the price of some competitively supplied input used in the final product market is endogenous and is altered by adoption of the innovation, then the optimal pricing strategy of the monopolist may lead to incomplete innovation. Thus, the standard result of complete adoption of the superior technology is partly attributable to the partial equilibrium nature of prior models.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 1738.

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Date of creation: 01 Nov 2000
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Publication status: Published in Economica, November 2000, vol. 67 no. #268, pp. 525-542
Handle: RePEc:isu:genres:1738
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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