Upstream market structure and the timing of technology adoption

Abstract

We study the timing of new cost‐reducing technology adoption in vertically related markets with either upstream monopoly or upstream separate suppliers. We find that technology adoption in the downstream market can take place earlier under upstream monopoly than under upstream separate suppliers. Hence, an upstream monopoly supplier can accelerate the adoption of new technology downstream. We also show that this finding does not depend on the particular features of a vertically related market, such as the contract type through which trading is conducted or the mode of downstream competition.