Strategic Experimentation and Disruptive Technological Change

50 Pages Posted: 21 Jun 2005

See all articles by Fabiano Schivardi

Fabiano Schivardi

Luiss Guido Carli - Department of Economics and Finance; Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR)

Martin Schneider

Independent

Date Written: February 2005

Abstract

This paper studies the diffusion of a new technology that is brought to market while its potential is still uncertain. We consider a dynamic game in which firms improve both a new and a rival old technology while learning about the relative potential of both technologies. We use the model to understand historical evidence on diffusion and market structure. In particular, the model explains why a change in market leadership often goes along with slow diffusion. It also provides a rational explanation for observed 'incumbent inertia' and shows how markets can make mistakes in the selection of new technologies.

Keywords: Oligopoly, innovation, learning, dynamic games

JEL Classification: C63, C73, D83, L13, O31

Suggested Citation

Schivardi, Fabiano and Schneider, Martin, Strategic Experimentation and Disruptive Technological Change (February 2005). CEPR Discussion Paper No. 4925. Available at SSRN: https://ssrn.com/abstract=747444

Fabiano Schivardi (Contact Author)

Luiss Guido Carli - Department of Economics and Finance ( email )

Viale Romania 32
Rome, Rome 00187
Italy

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Martin Schneider

Independent ( email )

No Address Available
United States

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