Department of Economics and Business Economics

Timing of product introduction in network economies under heterogeneous demand

Research output: Working paperResearch

  • Christian Dahl Winther, Denmark
  • School of Economics and Management
This paper studies the introduction of a new and incompatible technology in a spatial
market with network externalities. In competition with an established network, the entrant chooses how long to do research and a level of product differentiation, which determine the adoption patterns of consumers as a function of time and the scope for private rents. First, the paper derives a function showing the intertemporal evolution in market shares as a function of the choices made by the newcomer. Second, under incompatibility of standards each level of research is associated with both a minimum and a maximum level of product differentiation that should be chosen by the sponsor of the new technology in equilibrium. Third, the formal relationship between these variables are derived under compatibility.  Fourth, the entering firm's problem is solved by numerical methods to gain insight into the optimal linkage between research time and product design.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages29
Publication statusPublished - 2007

    Research areas

  • Product introduction, network externalities, product differentiation

See relations at Aarhus University Citationformats

ID: 9090470