Two state capital accumulation with heterogenous products: Disruptive vs. non-disruptive goods

Jonathan P. Caulkins, Gustav Feichtinger, Dieter Grass, Richard F. Hartl and Peter Kort

Journal of Economic Dynamics and Control, 2011, vol. 35, issue 4, 462-478

Abstract: The paper considers the problem of a firm that, while producing a standard product, has the option to introduce an innovative product. The innovative product competes with the standard product and will therefore reduce revenues of the standard product. A distinction is made between innovative products that do or do not become even more relatively appealing as their market share grows (e.g., because of network externalities). It is shown that in the former case, which we call a "disruptive" good, history dependent long run equilibria can occur, which are in line with recent real life economic examples.

Keywords: Investment; Product; innovation; Maximum; principle; Skiba; curve (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:35:y:2011:i:4:p:462-478

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