R&D and Buyers' Waiting Option

12 Pages Posted: 8 May 2006

See all articles by Eirik Gaard Kristiansen

Eirik Gaard Kristiansen

NHH Norwegian School of Economics; Norwegian School of Economics (NHH) - Department of Economics

Abstract

Anticipation of technological progress may induce buyers to delay the adoption of new technologies. We analyze how buyers' waiting option may feed back into firm's timing of innovations. Buyers are shown to have inefficiently weak incentives to wait for potentially better products. This induces firms to accelerate the introduction of new products. Furthermore, buyers' inclination to adopt new technologies prematurely expands firms' scope for preemption of potential rivals. The analysis sheds light on R&D competition in durable goods markets such as the market for aircraft.

Suggested Citation

Kristiansen, Eirik Gaard, R&D and Buyers' Waiting Option. Journal of Industrial Economics, Vol. 54, No. 1, pp. 31-42, March 2006, Available at SSRN: https://ssrn.com/abstract=891508 or http://dx.doi.org/10.1111/j.1467-6427.2006.00274.x

Eirik Gaard Kristiansen (Contact Author)

NHH Norwegian School of Economics ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 55 95 92 78 (Phone)
+47 55 95 95 43 (Fax)

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

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