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Does AMD Spur Intel to Innovate More, Journal of Political Economy

Abstract

We estimate an equilibrium model of dynamic oligopoly with durable goods and endogenous innovation to examine the effect of competition on innovation in the personal computer microprocessor industry. Firms make dynamic pricing and investment decisions while consumers make dynamic upgrade decisions, anticipating product improvements and price declines. Consistent with Schumpeter, we find that the rate of innovation in product quality would be 4.2 percent higher without AMD present, though higher prices would reduce consumer surplus by $12 billion per year. Comparative statics illustrate the role of product durability and provide implications of the model for other industries.

Type

Article

Author(s)

Ronald L. Goettler, Brett Gordon

Date Published

2011

Citations

Goettler, L. Ronald, and Brett Gordon. 2011. Does AMD Spur Intel to Innovate More. Journal of Political Economy. 119(6): 1141-1200.

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