 Nature of competition and new technology adoptionISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka Abstract: This paper analyses the incentives to adopt cost-reducing technology by firms in a horizontally differentiated industry. In our model there are several suppliers of a new technology. The extent of the cost reduction depends on the quality of the new technology. A firm has to buy the technology in a 'scoring auction'. This means that both the price and the quality (which affects marginal cost of production) of this new technology are no longer given but depend on the equilibrium outcome in the 'scoring auction'. We show that the nature of competition (Cournot or Bertrand) has no effect on the equilibrium decision of the firms to adopt the new technology when the quality of the new technology offered by the suppliers lies in the interior of the feasible range of qualities. In this case, both firms adopt new technology. However, when there is a corner solution, then it is possible to have equilibria where only one firm (or no firm) adopts the new technology. With corner solution the nature of competition (Cournot or Bertrand) makes a difference to the equilibrium outcomes. Date: 2014-03 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0895 Access Statistics for this paper More papers in ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka Contact information at EDIRC. |
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