Technological Diffusion with Horizontal Product Differentiation and Adaptation Costs.

In this paper, a model of diffusion incorporating horizontal product differentiation is analyzed. The analysis begins with the case of a single-brand monopolist, is extended to the multibrand case, and then to oligopoly. The speed of diffusion is shown to be related to the number of brands on the market, which in turn is determined endogenously. The model is further developed to analyze the impact of a government subsidy to adaptation costs on the diffusion path. Copyright 1990 by The London School of Economics and Political Science.