Regulation and Preemptive Technology Adoption

Michael Riordan

RAND Journal of Economics, 1992, vol. 23, issue 3, 334-349

Abstract: Two rival firms must decide if and when to adopt a new technology, knowing how adoption costs decline over time and how profit flows vary with adoption patterns. In many cases, price and entry regulations beneficially slow technology adoption by making preemption strategies less attractive. In some cases, these regulations can so discourage a firm from preemption as to change the order in which firms adopt new technologies, speeding one firm's adoption date and slowing the other's. In the context of a particular scenario for cable and telephone companies' adoption of new fiber optic technologies, the case for lifting the "cross-ownership ban" depends on the extent to which telephone companies are able to implement a superior technology. Reregulation of cable companies strengthens this case.

Date: 1992
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