| Abstract: | The paper deals with the process of substitution between technologies in a framework of increasing returns to scale. The approach stresses the interaction between capacity expansion and market demand as explanations of the diffusion of technologies into their niches. The demand and supply sides of the diffusion process are therefore brought together to determine simultaneously patterns of output and prices.It analyzes the dynamics of the substitution path, where a logistic diffusion process for the new technology is assumed, and determines the substitution curve between the old technology and the new one. |
