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Technical Change and Profits: The Prisoner's Dilemma

Author

Listed:
  • Jeffrey Baldani

    (Department of Economics, Colgate University, Hamilton, NY 13346-1398; Tel: (315) 228-7519; jbaldani@mail.colgate.edu)

  • Thomas R. Michl

    (Department of Economics, Colgate University, Hamilton, NY 13346-1398; Tel: (315) 228-7526; tmichl@mail.colgate.edu)

Abstract

We examine the implications of biased-lower marginal, but higher fixed, cost-technical change in a model of oligopoly. Such changes create an incentive for firms to adopt new technologies in a quest for increased output, market share, and profits. These individual incentives lead to a prisoner's dilemma: the increase in firms' outputs causes market price to fall. The analysis specifies conditions under which the decrease in price will result in lower profits for both the individual firms and the industry as a whole.

Suggested Citation

  • Jeffrey Baldani & Thomas R. Michl, 2000. "Technical Change and Profits: The Prisoner's Dilemma," Review of Radical Political Economics, Union for Radical Political Economics, vol. 32(1), pages 104-118, March.
    • Handle: RePEc:sae:reorpe:v:32:y:2000:i:1:p:104-118
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    Cited by:

    1. Peter Hans Matthews, 2000. "Technical Change and the Evolution of Class Conscious Norms," Review of Radical Political Economics, Union for Radical Political Economics, vol. 32(3), pages 470-481, September.

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