Does AMD spur intel to innovate more?

Ronald L. Goettler, Brett R. Gordon

Research output: Contribution to journalArticlepeer-review

64 Scopus citations

Abstract

We estimate an equilibrium model of dynamic oligopoly with durable goods and endogenous innovation to examine the effect of competition on innovation in the personal computer microprocessor industry. Firms make dynamic pricing and investment decisions while consumers make dynamic upgrade decisions, anticipating product improvements and price declines. Consistent with Schumpeter, we find that the rate of innovation in product quality would be 4.2 percent higher without AMD present, though higher prices would reduce consumer surplus by $12 billion per year. Comparative statics illustrate the role of product durability and provide implications of the model for other industries.

Original languageEnglish (US)
Pages (from-to)1141-1200
Number of pages60
JournalJournal of Political Economy
Volume119
Issue number6
DOIs
StatePublished - Dec 2011

ASJC Scopus subject areas

  • Economics and Econometrics

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