Product diffusion and pricing with market frictions
Derek Laing () and
Ping Wang ()
Economic Theory, 2002, vol. 19, issue 4, 707-736
We study pricing and product diffusion in a dynamic general equilibrium framework with product market frictions. Ongoing R&D activity leads, with an endogenously determined probability, to continual improvements in product quality. We characterize the steady-state equilibrium with endogenous product diffusion in which a number of different goods co-exist on the quality ladder. We show that the severity of the economy's market frictions is a crucial determinant of the pricing structure, the product diffusion pattern, the level of R&D investment, the rate of endogenous growth, the length of Schumpeterian product cycles and the possibility of multiple growth paths. Eliminating market frictions leads to a degenerate product ladder of precisely one step, containing only the most recent product, as in the monopolistic competition literature.
Keywords: Market frictions; Product diffusion; Vertical innovations; Schumpeterian growth. (search for similar items in EconPapers)
JEL-codes: O31 O41 (search for similar items in EconPapers)
Note: Received: August 16, 1999; revised version: March 6, 2001
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Access to the full text of the articles in this series is restricted
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:19:y:2002:i:4:p:707-736
Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2
Access Statistics for this article
Economic Theory is currently edited by Nichoals Yanneils
More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().