A substitution model of the evolutionary generations of technological products

In this study, a substitution model of the evolutionary generations of technological products is presented. The purpose of the model is to examine the demand side mechanisms which generate successive product life cycles along the path of technological improvements. In the model, the nature of substitution processes is summarized to the demand function which is derived from the consumer’s utility maximization problem. To describe the nature of technological substitution processes, the concepts of the vertical differentiation and the consumption externalities are considered in the utility function. The former is used to characterize the result of technological improvement and the latter is used in explaining the inertia of demand. To show the validity of the model, an empirical study is carried out using the data of the world DRAM market. [In Korean.]