Technology diffusion in a differentiated industry

Emmanuel Petrakis

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: This paper investigates the adoption timing pattern of a cost-reducing innovation in a differentiated oligopolistic industry. It compares price and quantity market competition with the second-best optimal adoption rule. The diffusion pattern typically depends on the degree of product differentiation, and on the ability of firms to precommit, or not, to a certain adoption date. When goods are imperfect substitutes, market competition leads always to later adoption dates than it is socially optimal. When goods are sufficiently close substitutesı the last adoption occurs always earlier than in the optimum; the first adoption might also occur earlier but only if preemption is a credible threat.

Keywords: Innovation; Diffusion; Horizontal; Differentiation; Imperfect; Competition (search for similar items in EconPapers)
Date: 1994-10
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:2921

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