When Less Can Be More: Setting Technology Levels in Complementary Goods Markets

Jörg Claussen, Christian Essling, Tobias Kretschmer

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    Abstrakt

    Higher technological quality often translates directly into higher consumer utility. However, many new products require a complementary product to operate. In such markets, releasing a technologically sophisticated product involves a trade-off as it excludes consumers whose complementary products no longer function with the core product. Firms therefore have to balance product quality against market size. Technological change brings a dynamic perspective to this trade-off as it renders existing technology obsolete but also increases performance of the complementary products, therefore increasing market potential. We study these mechanisms in the empirical context of computer games. In line with our expectations, we find an inverted U-shaped relationship between closeness to the technological frontier and sales revenues as well as differential effects of technological change depending on initial technological quality.
    OriginalsprogEngelsk
    TidsskriftResearch Policy
    Vol/bind44
    Udgave nummer2
    Sider (fra-til)328-339
    Antal sider12
    ISSN0048-7333
    DOI
    StatusUdgivet - 2015

    Emneord

    • Technological Frontier
    • Technological Change
    • Computer Games Industry

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