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Old Technology Upgrades, Innovation, and Competition in Vertically Differentiated Markets

Author

Listed:
  • Marc Bourreau

    (Telecom Paris)

  • Paolo Lupi

    (AGCOM)

  • Fabio Manenti

    (University of Padova)

Abstract

We study how the migration from an old to a new technology is affected by the access price to the old technology. We show that both the incumbent and the regulator are willing to set a very high access price to accelerate consumers' migration to the new technology. When the quality of the old technology is exogenous and the entrant dominates investment in the new technology, the old technology is completely switched off in equilibrium, whereas the old technology persists when the incumbent dominates investment. When the incumbent can decide on an endogenous upgrade of the old technology, the migration to the new technology is slowed down, and the entrant might be foreclosed.

Suggested Citation

  • Marc Bourreau & Paolo Lupi & Fabio Manenti, 2013. "Old Technology Upgrades, Innovation, and Competition in Vertically Differentiated Markets," "Marco Fanno" Working Papers 0158, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0158
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    References listed on IDEAS

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    Cited by:

    1. Briglauer, Wolfgang & Cambini, Carlo & Grajek, Michał, 2018. "Speeding up the internet: Regulation and investment in the European fiber optic infrastructure," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 613-652.
    2. Tselekounis, Markos & Orfanou, Georgia & Varoutas, Dimitris, 2014. "Coexistence of copper and fiber unbundling: Access charges and investment incentives," 25th European Regional ITS Conference, Brussels 2014 101400, International Telecommunications Society (ITS).
    3. Tai‐Liang Chen & Zuyi Huang, 2020. "Technology licensing or cost‐reducing outsourcing? Game theoretical analysis on consumers' home bias effects and firms' optimal strategies," Bulletin of Economic Research, Wiley Blackwell, vol. 72(4), pages 417-433, October.
    4. Tselekounis, Markos & Xylogianni, Eirini & Varoutas, Dimitris & Martakos, Drakoulis, 2013. "Geographically differentiated NGA deployment," 24th European Regional ITS Conference, Florence 2013 88533, International Telecommunications Society (ITS).
    5. Tselekounis, Markos & Varoutas, Dimitris & Martakos, Drakoulis, 2014. "A CDS approach to induce facilities-based competition over NGA networks," Telecommunications Policy, Elsevier, vol. 38(3), pages 311-331.
    6. Vitor Miguel Ribeiro, 2018. "Dark fiber price regulation in the absence of facilities-based competition," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(2), pages 243-278, June.
    7. Brito, Duarte & Tselekounis, Markos, 2016. "Access regulation and the entrant's mode of entry under multi-product competition in telecoms," Information Economics and Policy, Elsevier, vol. 37(C), pages 20-33.

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    More about this item

    Keywords

    Access; Investment; Vertical differentiation; Multi-product firms.;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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