Competitive diffusion

B. Jovanovic, G. M. Macdonald

    Research output: Contribution to journalArticlepeer-review


    This paper studies the evolution of a competitive industry in which a fixed number of firms reduce costs by innovating and by imitating their rivals' technologies. As the firms' technologies gradually improve, industry output expands and price falls. Technological leaders tend to rely on innovations to reduce their costs, whereas the laggards rely more on imitation. Imitation causes technology to spread from the leaders to the followers and forces some convergence of technology among firms as the industry matures. This convergence is accompanied by faster growth of smaller firms and a consequent tightening of the distribution of output over firms. Since imitation is a kind of spillover of technology, equilibrium is likely to involve insufficient innovative and imitative effort relative to a social optimum. -Authors

    Original languageEnglish (US)
    Pages (from-to)24-52
    Number of pages29
    JournalJournal of Political Economy
    Issue number1
    StatePublished - 1994

    ASJC Scopus subject areas

    • Economics and Econometrics


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