The Impact of Competition on Technology Adoption: An Apples-to-PCs Analysis

54 Pages Posted: 1 Aug 2010

See all articles by Adam M. Copeland

Adam M. Copeland

Federal Reserve Bank of New York

Adam Hale Shapiro

Federal Reserve Bank of San Francisco

Date Written: July 1, 2010

Abstract

We study the effect of market structure on a personal computer manufacturer’s decision to adopt new technology. This industry is unusual because there exist two horizontally segmented retail markets with different degrees of competition: the IBM-compatible (or PC) platform and the Apple platform. We first document that, relative to Apple, producers of PCs typically have more frequent technology adoption, shorter product cycles, and steeper price declines over the product cycle. We then develop a parsimonious vintage-capital model that matches the prices and sales of PC and Apple products. The model predicts that competition is the key driver of the rate at which technology is adopted.

Keywords: innovation, market structure, computers

JEL Classification: D40, L10, L63, O30

Suggested Citation

Copeland, Adam M. and Shapiro, Adam Hale, The Impact of Competition on Technology Adoption: An Apples-to-PCs Analysis (July 1, 2010). FRB of New York Staff Report No. 462, Available at SSRN: https://ssrn.com/abstract=1650685 or http://dx.doi.org/10.2139/ssrn.1650685

Adam M. Copeland (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Adam Hale Shapiro

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

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