The purpose of this research is to analyze the dynamics of competition in the hard disk industry using a structural model of differentiated demand for the industry and detailed product-level data on price, quantity, and product characteristics. The model will be used to estimate cross price elasticities between products and markups over marginal cost. The marginal cost estimates will then be used to observe the rate of decline of monopoly markups. This will allow the investigators to see whether declining prices due to increased productivity is due to learning by doing or reduced markups due to competition. The cross price elasticities will be used to analyze "spillovers": the effects on each firm's productivity of R&D activity by other firms. By putting all these estimates together the investigators can compare the social rate of return with the private rate of return to R&D.
