Flexible vs Dedicated Technology Adoption in the Presence of a Public Firm
29 Pages Posted: 17 May 2006
Date Written: January 2006
We study firms' adoption of flexible versus dedicated technologies in the context of a mixed versus a private duopoly with product differentiation. The flexible technology allows a firm to become multiproduct or multimarket without bearing additional costs. We find that a configuration where both firms adopt flexible technologies is more likely to arise in equilibrium in the private duopoly. A similar result occurs when both firms use a dedicated technology in the case of either almost independent products or products that are close substitutes. Privatization of the public firm is socially beneficial only in limited circumstances.
Keywords: Flexible Technology, Privatization, Public Firm, Mixed Duopoly
JEL Classification: L32, L33, L13, O33
Suggested Citation: Suggested Citation