COMPETITIVE INVESTMENT STRATEGIES IN NEW TECHNOLOGY ADOPTION WITH A FURTHER NEW TECHNOLOGY ANTICIPATED

Baojian YIN;Shigeng HU

Journal of Systems Science & Complexity ›› 2007, Vol. 20 ›› Issue (3) : 444-453.

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Journal of Systems Science & Complexity ›› 2007, Vol. 20 ›› Issue (3) : 444-453.
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COMPETITIVE INVESTMENT STRATEGIES IN NEW TECHNOLOGY ADOPTION WITH A FURTHER NEW TECHNOLOGY ANTICIPATED

  • Baojian YIN, Shigeng HU
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Abstract

This paper studies a general dynamic duopoly in which two firms compete in the adoption of current technology with a further new technology anticipated. Three kinds of equilibria may occur in technology adoption, namely the preemptive, sequential, and simultaneous equilibrium, depending on the level of operating
costs and the first-move advantage. It shows that the faster technological innovation encourages the leader to invest earlier, while induces the follower to invest later. Furthermore, like the investment costs, with the increase of the operating costs, the follower tends to invest later, while the leader tends to invest
earlier. However, the investment thresholds are more sensitive to the change of the operating costs than that of the investment costs.

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Operating costs / preemption / real options / technological uncertainty.

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Baojian YIN , Shigeng HU. COMPETITIVE INVESTMENT STRATEGIES IN NEW TECHNOLOGY ADOPTION WITH A FURTHER NEW TECHNOLOGY ANTICIPATED. Journal of Systems Science and Complexity, 2007, 20(3): 444-453
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