The Profitable Suppression of Inventions: Technology Choice and Entry Deterrence

Anthony Creane and Kaz Miyagiwa ()

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: AT&T was known for both funding a world-class research lab and delaying deployment of useful innovations from the lab. To explain this behavior we consider a model with an incumbent facing a potential entrant. The incumbent can choose from two technologies for production: old and new. The entrant's choice is limited to the old. We show that, under correlated production uncertainty, use of the common technology exposes the entrant to a greater risk. Therefore, the incumbent may suppress a newer, more efficient technology in favor of the old as a means to deter entry.

Date: 2007-11
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0702

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