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

Christian Essling, Jörg Claussen, Tobias Kretschmer

    Research output: Contribution to conferencePaperResearchpeer-review

    Abstract

    In most markets, higher technological quality directly translates into higher consumer utility. However, many new products do not work standalone but require the availability of a complementary product. In these markets, pushing a
    product closer to the technological frontier can have detrimental effects as this excludes increasing numbers of consumers whose complementary products no longer function with the focal product. Firms therefore have to balance product quality against market size. Technological change brings a dynamic perspective to this tradeoff 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 frontier and sales revenues as well as differential
    effects of technological change depending on initial technological quality.
    Original languageEnglish
    Publication dateJun 2013
    Number of pages32
    Publication statusPublished - Jun 2013
    EventThe 35th DRUID Celebration Conference 2013: Innovation, Strategy and Entrepreneurship: Competitiveness and Dynamics of Organizations, Technologies, Systems and Geography - ESADE Business School, Ramon Llull University, Barcelona, Spain
    Duration: 17 Jun 201319 Jun 2013
    Conference number: 35
    http://druid8.sit.aau.dk/registrant/index/login/cid/13

    Conference

    ConferenceThe 35th DRUID Celebration Conference 2013: Innovation, Strategy and Entrepreneurship
    Number35
    LocationESADE Business School, Ramon Llull University
    CountrySpain
    CityBarcelona
    Period17/06/201319/06/2013
    OtherThe DRUID Society Conference 2013
    Internet address

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