This article shows that the diffusion of a capital-embodied process innovation results from a pattern of decreasing incremental benefits and adoption costs for later adoptions. Strategic behavior is inessential to this finding. We develop a method for comparing diffusion rates for different...

Anticipated postinnovation collusion encourages R&D effort, but realized collusion later yields deadweight losses. In balancing this tradeoff, Bertrand industries sometimes outperform Cournot; sometimes they do not. Both usually outperform perfectly collusive industries. The optimal level of...