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The Effects Of Technological Change On The Quality And Variety Of Information Products

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  • David Waterman

Abstract

Anecdotal evidence suggests that producers of information products (TV programs, movies, computer software) may respond to potentially cost-saving technological change by increasing, rather than reducing, their total production investments in the 'first copy' of each product, possibly at the expense of product variety. Comparative statics show that under reasonable assumptions about consumer demand and production technology, competitive firms in a monopolistically competitive industry are in fact induced to increase first-copy investments as a result of either what we define as 'quality-enhancing' or 'cost-reducing' types of technological advance, whereas product variety either falls or stays the same. Results suggest that contrary to often held expectations, potentially cost-saving technological advances in information industries may result in greater market concentration.

Suggested Citation

  • David Waterman, 2007. "The Effects Of Technological Change On The Quality And Variety Of Information Products," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 16(8), pages 587-594.
    • Handle: RePEc:taf:ecinnt:v:16:y:2007:i:8:p:587-594
    DOI: 10.1080/10438590600925144
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    References listed on IDEAS

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    1. John Sutton, 2001. "Technology and Market Structure: Theory and History," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262692643, April.
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