Adner2002

Adner, R. (2002). When are technologies disruptive? A demand-based view of the emergence of competition. Strategic Management Journal, 23(8), 667–688. http://doi.org/10.1002/smj.246

Background Explanation

• I’m translating this because it seems useful in understanding the map of this area. - Background information provided by Adner2002

• This paper introduces a demand-based view of technology competition

  • Relationships between market segment selections
    • preference overlap
    • preference symmetry
  • Blur the boundary between two market segments

• threshold

  • “critical performance levels that must be met for an offering to become relevant to a decision set”
  • This is a well-known concept in the realm of social sciences (Granovetter, 1978; Varian, 1978; David, 1969; McFadden,1986; Meyer and Kahn, 1991)
  • The authors distinguish between two types of thresholds
    • A consumer’s functional threshold
      • = minimum level of performance below which a consumer will not accept a product regardless of its price.
      • Each customer has a different threshold and utility function, and preference is its maximization.
      • (Footnote 3) This formulation is a historical one.
        • This conceptualization follows a long tradition of work in marketing, decision science, and economics (Griliches, 1961; Lancaster, 1979; Green and Wind, 1973; Trajtenberg, 1990)
          • consumers have relative preferences for product characteristics
          • consumer choice can be usefully conceived as the maximization of utility measured in terms of the functional characteristics that are embodied in their product choices.
          • The treatment of preferences for goods as being derived from preferences for collections of characteristics lies at the heart of established techniques such as hedonic analysis, conjoint analysis, and multidimensional logit models of brand choice
    • Net utility threshold
      • Intermediate between price and customer decision function.
      • highest price a consumer will pay for a product that just meets her functional threshold

• The value trajectory is the gradient of the [Cobb-Douglas utility curve

  • That is, the point at which the sum of functions is minimized in obtaining a particular utility.
  • In Lancaster terms. - it is defined by the vector which minimizes the characteristic resources required to attain a given utility level; that is, the vector along which the compensating function is equal to unity (Lancaster, 1979, 1991)

• I’m putting price in utility in reciprocal form (eq. 2) Well, of course you do.

• $U=B^a(1/P{)}^{1-a}$

  • This is taken as the logarithm $\log U=a\log B+(1-a)\log (1/P)$
    • $\log U/(1-a)=a/(1-a)\log B-\log P$
  • and therefore $U=KB-P$, which is a monotonic variant of Tirole1988 (footnote 9)

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