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The significance
of path dependency objectives did by static and dynamic
economies of scales in the market lead to positive feedback establishment,
which in turn can give rise to sub-optimal results on markets. The main reasons
for this are Firstly of scale, thereby associated economies of scale and producers varied experience curve effects, focusing
on the cumulative production refer production quantity (dynamic
scale). The phenomenon of direct network externalities describes the relationship
that individual costs of the use of an asset with increasing frequency of use because
of physical or technological circumstances. For each additional user brings
seeking a network good for himself and all other users with additional
value. A central Example of seeking effects are network infrastructure, such
as telephone networks, networks rail or power grids. Everyone another user
of a telephone network, For Example, brings all other users essential added
value because it extends the reach of the network. A similar logic is therefore
subject to social networking sites. With everybody another user creates
the network greater benefit because more users are achievable. As a final cause
of the loading path dependencies founding positive feedback effects can be
consumer-side establish internal dynamics of learning processes. Thus,
users get used to certain a distinct product class and form for this purpose
with the time of specific expertise. Now if a change to another technology
completed, this application knowledge tied to a big part. When it already
potentially performance from a technological perspective are processing more
effective alternative outside the path considered. From a theoretical
perspective model path dependence can follow in question are presented for
technological competition.

 

Conclusion

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The main objective of this work was to provide a
formal model capable of describing the basic dynamics of the sailing-ship
effect: the advent of a new technology stimulates a response of the incumbent
technology, so that the latter survives for an unexpected long period, which is
the result of rational allocation of resources in R&D. The new lease of
life comes from intentional action, i.e. R&D, aimed at improving the
performance of the incumbent technology. In doing this, we obtain the optimal
expenditure on R&D that the incumbent should bear. Thus, the new technology
overtakes the old one later than would have happened without improvements, and
at a higher level of performance. We have based our simulations on profit maximization
and, as usual, we have made some assumptions to keep the model as simple as
possible. In this way, we have been able to identify the optimal level of
investments in R&D as the result of profit maximization. Different functions
might have been considered at the price of a much more complicated model, whose
heuristic capabilities, however, would have not been improved, that is, the qualitative results would not
change.

As we have seen, eventually the new technology
overtakes the old one; however, this overtaking occurs at a later time than
would have occurred if the old technology had not been improved, and then
overtaking occurs at a higher level of the performance for both technologies – a higher
performance that would have never been reached, had the new technology never
appeared. We need to stress that this delay in overtaking in performance is a qualitative result that does not depend upon the parameters
‘values. To conclude despite its simplistic assumptions and despite being based
on simulations, the model we propose can give an account of the processes of
competition that develops between new and old technologies.

 

Abbreviations List

 

S.No

Abbreviation

Full Form

1.     
 

R

Research and Development

2.     
 

ADSL

Asymmetric digital subscriber line

3.     
 

USA

United States of
America

4.     
 

UK

United Kingdom

5.     
 

CCD

Charged Coupled Device

6.     
 

APS

Active
pixel sensor

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