Timing of Technology Adoption and Product Market Competition

Abstract

This paper examines how product market competition affects firms’ timing of adopting a new technology as well as whether the market provides sufficient adoption incentives. It shows that adoption dates differ not only among symmetric firms but also among markets with Cournot and Bertrand competition. More specifically, Cournot competition can lead to earlier adoption than Bertrand competition. It shows also that competition toughness does not always reinforce adoption incentives. When goods are differentiated enough, adoption occurs later than it is socially optimal.technology adoption, innovation, diffusion, product differentiation