Product Scope and Entry Deterrence in Technology Markets

41 Pages Posted: 13 Oct 2008

See all articles by Ravi Mantena

Ravi Mantena

University of Rochester - Simon Business School

Arun Sundararajan

New York University (NYU): Stern School of Business and Center for Data Science

Date Written: 2002

Abstract

We model an oligopolistic technology market in which firms endogenously choose product scope,fixed costs are affected by exogenous technological progress, and there may be threat of entry. Ouranalysis shows that equilibrium outcomes involve substantial overinvestment in product scope,which benefit consumers and hurt firms, relative to the social optimum. Technological progressgenerally increases consumer surplus and lowers firm profits. If entry is threatened bilaterallyacross two converging markets, both either accommodate entrants from the rival market, or bothdeter entry; continuous progress in technology can cause equilibria shifts, leading to discontinuousand radical redistribution of surplus across markets.

Suggested Citation

Mantena, Ravi and Sundararajan, Arun, Product Scope and Entry Deterrence in Technology Markets (2002). Information Systems Working Papers Series, Vol. , pp. -, 2002. Available at SSRN: https://ssrn.com/abstract=1283001

Ravi Mantena (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Arun Sundararajan

New York University (NYU): Stern School of Business and Center for Data Science ( email )

44 West 4th Street, KMC 8-90
New York, NY 10012
United States

HOME PAGE: http://digitalarun.ai/

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