Strategic Experimentation and Disruptive Technological Change

Fabiano Schivardi () and Martin Schneider ()

No 4925, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies the diffusion of a new technology that is brought to market while its potential is still uncertain. We consider a dynamic game in which firms improve both a new and a rival old technology while learning about the relative potential of both technologies. We use the model to understand historical evidence on diffusion and market structure. In particular, the model explains why a change in market leadership often goes along with slow diffusion. It also provides a rational explanation for observed ‘incumbent inertia’ and shows how markets can make mistakes in the selection of new technologies.

Keywords: dynamic games; innovation; learning; oligopoly (search for similar items in EconPapers)
JEL-codes: C63 C73 D83 L13 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth, nep-ino and nep-tid
Date: 2005-02
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Journal Article: Strategic Experimentation and Disruptive Technological Change (2008)
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