Staff Report, Federal Reserve Bank of New York 462
We study the effect of market structure on a personal computer manufacturer's decision to adopt new technology. This industry is unusual because there exist two horizontally segmented retail markets with different degrees of competition: the IBM-compatible (or PC) platform and the Apple platform. We first document that, relative to Apple, producers of PCs typically have more frequent technology adoption, shorter product cycles, and steeper price declines over the product cycle. We then develop a parsimonious vintagecapital model that matches the prices and sales of PC and Apple products. The model predicts that competition is the key driver of the rate at which technology is adopted.