Innovative Products, Prisoner Dilemma and an Increasing CostComponent for the Firms in the New Economy

Authors : Arzdar Kiracı

Pages : 39-50

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Publication Date : 2016-07-23

Article Type : Research Paper

Abstract :Technological developments in information and communication sectors combined with globalization has started a transformation process and a new economy. New Economy firms that produce new technologies encourage the use of their products by stressing the economic advantage of their products and the advantage of early adopting their products in this transformation process. In addition, New Economy firms remind that the ones who predict the direction of this transformation and successfully adopt themselves to the new environment become stronger and the continuous change in the new environment is eliminating the institutions resisting to the change before they are able to observe the consequence of these changes. This is a marketing strategy. This paper investigates this marketing strategy and the behavior of adopting firms by constructing a game theoretic model. One of the interesting results is that if the parameters of the game are suitable then adopting an innovative product is a strictly dominant strategy and this results in a prisoner dilemma. Adopting an innovative product is a gain in the first stage but at the end makes the adopter worse off.
Keywords : Cost Structure, Firm Decision, Game Theory, Globalization, New Economy