Estimating the Impact of a Potential Process Innovation and the Optimal Strategy of Licensing

Weifang Lou ()
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Weifang Lou: School of Economics, La Trobe University

No 2009.03, Working Papers from School of Economics, La Trobe University

Abstract: This paper explores the implication of a potential quality-improving innovation through its application to digital camera market. It simulates post-innovation prices and sales of cameras and quantitatively estimates the economic impacts of the innovation based on a random coefficient structural model and existing market data. The results show that the potential gain to producers and consumers from the new technology varies substantially depending on the superiority of the technology and the composition of the adopters. The inventor of the innovation benefit more by licensing it to a larger camera maker and profits increase in the number of adopted camera makers.

Keywords: Innovation; Adoption; Product Differentiation; Technology Licensing; Welfare (search for similar items in EconPapers)
Date: 2009-10
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