 When less can be more – Setting technology levels in complementary goods marketsJörg Claussen, Christian Essling and Tobias Kretschmer Research Policy, 2015, vol. 44, issue 2, 328-339 Abstract: Higher technological quality often translates directly into higher consumer utility. However, many new products require a complementary product to operate. In such markets, releasing a technologically sophisticated product involves a trade-off as it excludes consumers whose complementary products no longer function with the core product. Firms therefore have to balance product quality against market size. Technological change brings a dynamic perspective to this trade-off as it renders existing technology obsolete but also increases performance of the complementary products, therefore increasing market potential. We study these mechanisms in the empirical context of computer games. In line with our expectations, we find an inverted U-shaped relationship between closeness to the technological frontier and sales revenues as well as differential effects of technological change depending on initial technological quality. Keywords: Technological frontier; Technological change; Computer games industry (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:44:y:2015:i:2:p:328-339 DOI: 10.1016/j.respol.2014.10.005 Access Statistics for this article Research Policy is currently edited by M. Bell, B. Martin, W.E. Steinmueller, A. Arora, M. Callon, M. Kenney, S. Kuhlmann, Keun Lee and F. Murray More articles in Research Policy from Elsevier |
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