We document that sales of individual products decline steadily throughout most of the product life cycle. Products quickly become obsolete as they face competition from newer products sold by competing firms and the same firm. We build a dynamic model that highlights an innovation-obsolescence cycle, where firms need to introduce new products to grow; otherwise, their portfolios become obsolete as rivals introduce their own new products. By introducing new products, however, firms accelerate the decline of their own existing products, further depressing their sales. This mechanism has sizable implications for quantifying economic growth and the impact of innovation policies.
We document that sales of individual products decline steadily throughout most of the product life cycle. Products quickly become obsolete as they face competition from newer products sold by competing firms and the same firm. We build a dynamic model that highlights an innovation-obsolescence cycle, where firms need to introduce new products to grow; otherwise, their portfolios become obsolete as rivals introduce their own new products. By introducing new products, however, firms accelerate the decline of their own existing products, further depressing their sales. This mechanism has sizable implications for quantifying economic growth and the impact of innovation policies.
A currency’s essential feature is to be a medium of exchange. This study explores the potential of cryptocurrencies to be used in daily transactions in El Salvador, the first country to make bitcoin legal tender. The government’s “big push” introduced “Chivo Wallet,” a digital wallet sharing features with Central Bank Digital Currencies (CBDCs), with perks to use it for trading bitcoins and US dollars. Through a nationally representative, face-to-face survey of 1800 households and blockchain data encompassing all Chivo Wallet transactions, we document a pattern of low and decreasing usage of digital payments and bitcoin. Privacy and security concerns are key adoption barriers, which speaks to a policy debate on crypto and CBDCs with anonymity at its core. Additionally, we estimate Chivo Wallet’s adoption cost and complementarities among adopters.