Technology adoption deterrence through learning and capacity investment

Cabral, Ricardo

http://hdl.handle.net/10400.3/4760

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Authors

Cabral, Ricardo

Abstract(s)

This paper analyzes an incumbent’s use of learning and manufacturing capacity investment to deter or accommodate adoption of a new technology by a potential competitor, using a perfect state-space equilibrium concept and a model motivated by the semiconductor industry. The results indicate that, under typical market conditions, an incumbent leaves some capacity idle after learning-by-doing cost reductions have been achieved, and an incumbent that follows an accommodation strategy invests in more learning than a monopoly that does not face the threat of entry. Finally, the analysis suggests that investments in learning and manufacturing capacity allow early adopters to credibly alter strategies (and equilibria) of the adoption game in their favor vis-à-vis followers.

Keywords

Learning-by-Doing Technology Adoption

URI

http://hdl.handle.net/10400.3/4760

Citation

Cabral, Ricardo (2007). Technology adoption deterrence through learning and capacity investment, "Working Paper Series", 5, 29 pp.. Ponta Delgada: Universidade dos Açores, CEEAplA-A.