The Effects of Technological Change on the Quality and Variety of Information Products

20 Pages Posted: 6 Mar 2006

See all articles by David Waterman

David Waterman

Indiana University - Department of Telecommunications

Multiple version iconThere are 2 versions of this paper

Date Written: February 7, 2006

Abstract

Anecdotal evidence suggests that producers of information products (TV programs, movies, computer software) may respond to potentially cost saving technological change by increasing, rather than reducing, their total production investments in the "first copy" of each product, possibly at the expense of product variety. Comparative statistics show that under reasonable assumptions about consumer demand and production technology, a monopolist is in fact induced to increase first copy investments as a result of either what are defined as "quality-enhancing" or "cost-reducing" types of technological advance. In a monopolistically competitive industry, first copy investments also rise for both types of technological change, while variety falls or stays the same. Results suggest that contrary to often held expectations, potentially cost saving technological advances in information industries may result in greater market concentration.

Keywords: Technological change, productivity, entertainment, information

JEL Classification: D24, O33, L82, L86

Suggested Citation

Waterman, David, The Effects of Technological Change on the Quality and Variety of Information Products (February 7, 2006). Available at SSRN: https://ssrn.com/abstract=886837 or http://dx.doi.org/10.2139/ssrn.886837

David Waterman (Contact Author)

Indiana University - Department of Telecommunications ( email )

1229 East 7th Street
Bloomington, IN 47405
United States
812-855-6170 (Phone)

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