Old Technology Upgrades, Innovation, and Competition in Vertically Differentiated Markets

50 Pages Posted: 16 Feb 2013

See all articles by Marc Bourreau

Marc Bourreau

Telecom ParisTech

Paolo Lupi

AGCOM - Italian Communication Regulatory Authority

Fabio M. Manenti

University of Padua - Department of Economics and Management

Date Written: February 14, 2013

Abstract

We study how the migration from an old to a new technology is affected by the access price to the old technology. We show that both the incumbent and the regulator are willing to set a very high access price to accelerate consumers' migration to the new technology. When the quality of the old technology is exogenous and the entrant dominates investment in the new technology, the old technology is completely switched off in equilibrium, whereas the old technology persists when the incumbent dominates investment. When the incumbent can decide on an endogenous upgrade of the old technology, the migration to the new technology is slowed down, and the entrant might be foreclosed.

Keywords: Access, Investment, Vertical differentiation, Multi-product firms

JEL Classification: L96, L51

Suggested Citation

Bourreau, Marc and Lupi, Paolo and Manenti, Fabio M., Old Technology Upgrades, Innovation, and Competition in Vertically Differentiated Markets (February 14, 2013). Available at SSRN: https://ssrn.com/abstract=2217525 or http://dx.doi.org/10.2139/ssrn.2217525

Marc Bourreau

Telecom ParisTech ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

Paolo Lupi

AGCOM - Italian Communication Regulatory Authority ( email )

via Isonzo 21/b
Rome, 00198
Italy
+390669644319 (Phone)
+390817507623 (Fax)

HOME PAGE: http://www.agcom.it

Fabio M. Manenti (Contact Author)

University of Padua - Department of Economics and Management ( email )

via Del Santo 33
Padova, 35123
Italy

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