Flexible Technology and Informative Experiments
Innovative firms have an incentive to invest in a flexible technology to employ more sophisticated experimentation strategies. Flexibility in terms of ability to differentiate and to alter quality at no cost is shown to solve the inadequate learning problem in a model with discontinuous demand. Experimentation with a flexible technology induces a bias in product selection towards more varieties and products of higher qualities. Over time products will become closer substitutes.
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|Date of creation:||Oct 1998|
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