The Profitable Suppression of Inventions: Technology Choice and Entry Deterrence

25 Pages Posted: 17 Dec 2007

See all articles by Kaz Miyagiwa

Kaz Miyagiwa

Emory University - Department of Economics; Osaka University - Institute of Social and Economic Research (ISER); Florida International University (FIU) - Department of Economics

Anthony Creane

University of Kentucky

Date Written: November 2007

Abstract

AT&T was known for both funding a world-class research lab and delaying deployment of useful innovations from the lab. To explain this behavior we consider a model with an incumbent facing a potential entrant. The incumbent can choose from two technologies for production: old and new. The entrant's choice is limited to the old. We show that, under correlated production uncertainty, use of the common technology exposes the entrant to a greater risk. Therefore, the incumbent may suppress a newer, more efficient technology in favor of the old as a means to deter entry.

Keywords: technology choice, entry deterrence, production shocks, correlations of strategies

JEL Classification: D83, L12, L13

Suggested Citation

Miyagiwa, Kaz and Creane, Anthony, The Profitable Suppression of Inventions: Technology Choice and Entry Deterrence (November 2007). ISER Discussion Paper No. 702. Available at SSRN: https://ssrn.com/abstract=1072462 or http://dx.doi.org/10.2139/ssrn.1072462

Kaz Miyagiwa (Contact Author)

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki Osaka 567-0047
Japan

Florida International University (FIU) - Department of Economics ( email )

Miami, FL 33199
United States

Anthony Creane

University of Kentucky ( email )

Lexington, KY 40506
United States

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