We study how snob consumption externalities (SCEs) affect the adoption of a new technology in a vertically differentiated duopoly. We show that the leader firm does not adopt when SCEs are medium or high. From a social viewpoint, medium SCEs lead to excessive inertia (the leader firm should adopt, but it does not), and high SCEs lead to reverse adoption (the adopter is the wrong firm). Lower SCE thresholds emerge when the innovative step is large. Our findings suggest that selective policies must be implemented to increase market efficiency, including discouraging adoption.
Snobby markets and technology adoption / M. Alderighi, C. Feder. - In: ECONOMICS OF INNOVATION AND NEW TECHNOLOGY. - ISSN 1043-8599. - 30:6(2021), pp. 603-620. [10.1080/10438599.2020.1741945]
Snobby markets and technology adoption
M. Alderighi
Primo
;
2021
Abstract
We study how snob consumption externalities (SCEs) affect the adoption of a new technology in a vertically differentiated duopoly. We show that the leader firm does not adopt when SCEs are medium or high. From a social viewpoint, medium SCEs lead to excessive inertia (the leader firm should adopt, but it does not), and high SCEs lead to reverse adoption (the adopter is the wrong firm). Lower SCE thresholds emerge when the innovative step is large. Our findings suggest that selective policies must be implemented to increase market efficiency, including discouraging adoption.
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