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Open Access Publications from the University of California

A Demand-based View of Technology Competition: Demand Structure and Technology Displacement


This paper investigates how the structure of market demand affects the nature and extent of competition over consumer subgroups in the market. It develops an analytic model to examine how the satisfaction of consumers¹ requirements and the relationships between consumers¹ preferences interact to affect competitive interactions. The model, tested using simulation, reveals demand-side influences on the emergence of three distinct competitive regimes: isolation, in which technologies do not interact throughout the course of their evolution; convergence, in which technologies evolve to compete head-on for the same consumer groups; and displacement, in which one technology cedes dominance of its home market to its rival. The model highlights the critical role played by price in influencing technology displacements and sheds some new light, supported by empirical data from the disk drive industry, on the important phenomenon of disruptive technologies.

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