Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcasts
  • About Us
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Cold Call Podcast
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    • COVID-19 Business Impact Center
      COVID-19 Business Impact Center
      Ratcheting, Competition, and the Diffusion of Technological Change: The Case of Televisions Under an Energy Efficiency Program
      27 Sep 2018Working Paper Summaries

      Ratcheting, Competition, and the Diffusion of Technological Change: The Case of Televisions Under an Energy Efficiency Program

      by Tomomichi Amano and Hiroshi Ohashi
      The diffusion of innovation in many markets is greatly influenced by the presence of policy intervention. Importantly, diffusion is further affected by the fact that firms often also have a say in affecting the implementation of policy. This analysis of the Japanese TV market suggests that firms may delay the introduction of more high quality products when there are across-the-board policy standards.
      LinkedIn
      Email

      Author Abstract

      In differentiated goods markets with societal implications, quality standards are commonly implemented to avoid the under-provision of innovation. Firms have clear incentives to engage in strategic behavior because policymakers use market outcomes as a benchmark in designing regulation. This study examines a unique energy efficiency standard for television sets, under which future minimum efficiency standards are explicitly a function of current product offerings. The setting illustrates firms' dual incentives at work: A firm better differentiates products under a looser standard but may want to induce a tighter standard if it can benefit from raising rivals' costs. These incentives drive firms to ratchet quality. We develop a structural model of product entry that illustrates how the regulator's standard setting rule affects a firm's product quality decision. Counterfactual simulations illustrate that ratcheting down was prevalent in this market and that incentives to ratchet up did not exist. The results suggest that in many commonly regulated markets in which firms share similar cost structures, firms are likely to experience incentives to ratchet down and delay the introduction of innovative products. The study highlights the importance of understanding supply side incentives, such as ratcheting, in designing and assessing policy.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: September 2018
      • HBS Working Paper Number: HBS Working Paper #19-021
      • Faculty Unit(s): Marketing
        Trending
          • 25 Feb 2019
          • Research & Ideas

          How Gender Stereotypes Kill a Woman’s Self-Confidence

          • 17 May 2017
          • Research & Ideas

          Minorities Who 'Whiten' Job Resumes Get More Interviews

          • 24 Feb 2021
          • Lessons from the Classroom

          What History's Biggest Wars Teach Us About Leading in Peace

          • 17 Feb 2021
          • Research & Ideas

          Pandemic Self-Care for CEOs: Rituals, Running, and Cognitive Restructuring

          • 22 Feb 2021
          • Book

          Reaching Today's Omnichannel Customer Takes a New Sales Strategy

      Tomomichi Amano
      Tomomichi Amano
      Assistant Professor of Business Administration
      Contact
      Send an email
      → More Articles
      Find Related Articles
      • Innovation and Invention
      • Technology Adoption
      • Telecommunications
      • Entertainment and Recreation
      • Japan

      Sign up for our weekly newsletter

      Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
      ǁ
      Campus Map
      Harvard Business School Working Knowledge
      Baker Library | Bloomberg Center
      Soldiers Field
      Boston, MA 02163
      Email: Editor-in-Chief
      →Map & Directions
      →More Contact Information
      • Make a Gift
      • Site Map
      • Jobs
      • Harvard University
      • Trademarks
      • Policies
      • Digital Accessibility
      Copyright © President & Fellows of Harvard College