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Extending the Frontier: A Structural Model of Investment and Technological Competition in the Supercomputer Industry

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  • Joao Macieira

Abstract

This paper proposes and estimates a dynamic structural model of innovation in the super- computer industry to evaluate the dependence of technological innovation on market structure. The model has two key features. First, it allows for technological leapfrogging while controlling for multiproduct ?rm pro?ts. Second, it uses the inclusive value of Nevo and Rossi (2007) to de- ?ne quality adjustment, which controls for ?rm entry, exit, product introduction and scrappage without modeling these decisions explicitly. Model estimates facilitate counterfactual compar- isons of how the maximal computing speed evolution di?ers under di?erent market structures. Consistent with the importance of a "selection e?ect" (Aghion et al, 2001, 2005), increased levels of competition are associated with a higher rates of innovation and increased welfare. However, the marginal increase in welfare is decreasing in the number of competitors.

Suggested Citation

  • Joao Macieira, 2007. "Extending the Frontier: A Structural Model of Investment and Technological Competition in the Supercomputer Industry," Working Papers e07-10, Virginia Polytechnic Institute and State University, Department of Economics.
  • Handle: RePEc:vpi:wpaper:e07-10
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    File URL: ftp://repec.econ.vt.edu/Papers/Macieiria/macieira_superc_jan22.pdf
    File Function: First version, 2007
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    References listed on IDEAS

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    Cited by:

    1. Victor Aguirregabiria & Victor Aguirregabiria & Aviv Nevo & Aviv Nevo, 2010. "Recent Developments in Empirical IO: Dynamic Demand and Dynamic Games," Working Papers tecipa-419, University of Toronto, Department of Economics.

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    Keywords

    Dynamic oligopoly; innovation; technological frontier; product quality; simulation estimation; supercomputers.;

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