GDL

Competitive diffusion of two technologies in a finite market is modeled through birth-and-death processes.


For pure birth processes, final equilibria cover the whole range of possible outcomes, and their distribution depends both on ex-ante parameters and on initial advantages. Furthermore, the necessary lead to offset ex-ante disadvantages in diffusion rates decreases in relative terms with market size. When deaths are introduced, there is extinction with probability one given infinite time. The system may spend large amounts of time around an "equilibrium" point having the same characteristics as final equilibria in pure birth processes, however. The implication is that ex-post observation of the process tells little or nothing concerning ex-ante parameters. If a renewal is introduced at extinction, limit probabilities may be obtained. In this case, distribution tends to concen- trate on states in which only one technology is present. Results are robust with respect to assumptions on the functional specification of birth and death rates.

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