Better late than early : vertical differentiation in the adoption of a new technology / Prajit K. Dutta, Saul Lach, Aldo Rustichini.

Format:

Book

Author/Creator:

Dutta, Prajit K., author.

Lach, Saul, author.

Rustichini, Aldo, author.

Series:

Working Paper Series (National Bureau of Economic Research) ; Number w4473.

Working Paper Series (National Bureau of Economic Research) ; Number w4473

Language:

English

Subjects (All):

New products--Mathematical models.

New products.

Duopolies--Mathematical models.

Duopolies.

Physical Description:

1 online resource (27 pages) : illustrations.

Place of Publication:

Cambridge, Massachusetts : National Bureau of Economic Research, 1993.

Summary:

After the initial breakthrough in the research phase of R&D a new product undergoes a process of change, improvement and adaptation to market conditions. We model the strategic behavior of firms in this development phase of R&D. We emphasize that a key dimension to this competition is the innovations that lead to product differentiation and quality improvement. In a duopoly model with a single adoption choice, we derive endogeneously the level and diversity of product innovations. We demonstrate the existence of equilibria in which one firm enters early with a low quality product while the other continues to develop the technology and eventually markets a high quality good. In such an equilibrium, no monopoly rent is dissipated and the later innovator makes more profits. Incumbent firms may well be the early innovators, contrary to the predictions of the hypothesis.

Notes:

Description based on publisher supplied metadata and other sources.