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Contributions to Game Theory and Management, 2007, том 1, страницы 189–244
(Mi cgtm13)
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Monopoly, Diversification through Adjacent Technologies, and Market Structure
Mehmet Karaaslan Isik University,
Faculty of Economics and Administrative Sciences,
Sile Istanbul, 34980, Turkey
Аннотация:
The theoretical literature on technological competition has
been mostly concerned with various aspects of innovative activity in
a single market. By contrast, this paper studies the adoption of a sequence of product innovations in two markets characterized by a common technology base, and illustrates the effects of technological rivalry
and preemption. Under a perfect information scenario, it is shown in
a two incumbent model that if the innovation is drastic (total replacement of the old product), under certain conditions the fear of being
preempted by the entrant forces the firms to diversify their product
lines by adopting the innovations across each otits’s markets. On the
ot hand, with non-drastic innovation (partial replacement of the old
product), it is more likely for the firms to diversify in their own product lines.
Out of a class of equilibria characterized under non-drastic innovation,
one is optimal in which innovations are adopted in the firms' own markets. In the Pareto inferior equilibria, the firms either adopt innovations
in each other’s market so that incumbency changes hands or jointly
adopt both innovations in two separate product lines. Perfect Bayesian
equilibria are characterized under an asymmetric information scenario
where one of the firms is assumed to have complete information about
the relevant costs of adopting an innovation in a separate product line.
If the priors are based on pessimism, it is more often subject to exploitation by the informed firm leading to pooling equilibrium, while
optimistism more often leads to diversification and to a competitive
market structure in both product lines under a separating equilibrium.
In all the cases considered, both innovations are adopted, and in most
cases they are adopted by the high cost entrant. The former is socially desirable, but the latter is not. More competitiveness necessarily
implies wasteful expenditure by the high cost firm. Lack of competitiveness and technological rivalry, on the other hand, imply that maximum
product diversity may not be achieved.
Ключевые слова:
Tehnological rivalry, preemption, adoption of innovations, upgrading.
Образец цитирования:
Mehmet Karaaslan, “Monopoly, Diversification through Adjacent Technologies, and Market Structure”, Contributions to Game Theory and Management, 1 (2007), 189–244
Образцы ссылок на эту страницу:
https://www.mathnet.ru/rus/cgtm13 https://www.mathnet.ru/rus/cgtm/v1/p189
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