This dissertation explores how market forces affect innovation and examines the socially optimal adoption of capital-embodied technology. Chapters 2 and 3 explore how imperfect competition interacts with innovation to affect market structure. These chapters show how additional structure on the space of technologies and increasing returns to specialization in research lead to an observed pattern of persistence of market dominance. This additional structure is the intuitive division of the space of technologies into types. These chapters explain an observed pattern in which entrants replace an industry leader by innovating in an emerging technology. The first chapter explains the basic model and characterizes the Markov perfect equilibrium. Parametric sufficient conditions are given for the equilibrium to result in a change in leadership. In addition, a comparative static result and a calibration of the model are used to compare the model's predictions to the observations of the hard drive industry. The model's predictions match the observations in these metrics. The second chapter shows that the model's predictions hold under a more realistic demand specification. The Markov perfect equilibrium is characterized under the specification that the payoff to being the industry leader depends on the 1evel of the technology. Parametric sufficient conditions are given for a change of equilibrium to occur under this specification. The third paper examines a sometimes optimal policy, the Stiglitz Policy, in a growth model of capital-embodied technology. Dynamical systems theory is used to characterize the cyclical and chaotic properties of this policy. This analysis is then used to resolve the non-optimality of the policy in the undiscounted setting by showing it to be "bad".
|Advisor:||Young, H. Peyton, Harrington, Joseph, Jr.|
|School:||The Johns Hopkins University|
|School Location:||United States -- Maryland|
|Source:||DAI-A 68/11, Dissertation Abstracts International|
|Subjects:||Economics, Economic history, Economic theory|
|Keywords:||Capital-embodied technology, Economics, Imperfect competition, Innovation, Technology|
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