Market Segmentation and the Sources of Rents from Innovation: Personal Computers in the Late 1980s

We evaluate the sources of transitory market power in personal computers in the late 1980s to explain how high rates of imitative entry coexisted with high rates of innovative investment. We measure the impact of different principles of differentiation (PDs); each PD reflects a distinct notion of pr...

Full description

Saved in:
Bibliographic Details
Published inThe Rand journal of economics Vol. 28; pp. S17 - S44
Main Authors Bresnahan, Timothy F., Stern, Scott, Trajtenberg, Manuel
Format Journal Article
LanguageEnglish
Published Santa Monica RAND 01.01.1997
Rand Corporation
Subjects
Brands
Computer industry
Demand curves
Economic models
Innovation
Innovations
Market prices
Market segmentation
Market share
Microprocessors
Parametric models
Personal computers
Product differentiation
Product innovation
Studies
Technological innovation
Online AccessGet full text

Cover

More Information
Summary:We evaluate the sources of transitory market power in personal computers in the late 1980s to explain how high rates of imitative entry coexisted with high rates of innovative investment. We measure the impact of different principles of differentiation (PDs); each PD reflects a distinct notion of product similarity, offering a potential source of market segmentation. One PD measures the substitutability between frontier and nonfrontier products, while a second PD measures the advantage afforded by a brand-name reputation. We find segmentation along both dimensions, which meant that the effects of competitive events (such as entry) were localized. A high rate of entry was consistent with slow erosion of incumbent rents.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0741-6261
1756-2171
DOI:10.2307/3087454