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Optimal investment in learning-curve technologies

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  • Della Seta, Marco
  • Gryglewicz, Sebastian
  • Kort, Peter M.

Abstract

We study optimal investment in technologies characterized by the learning curve. There are two investment patterns depending on the shape of the learning curve. If the learning process is slow, firms invest relatively late and on a larger scale. If the curve is steep, firms invest earlier and on a smaller scale. We further demonstrate that learning investment differs greatly from investment in technologies without learning effects. Learning investments generate substantial initial losses and are very sensitive to downside risk. We show that the most susceptible to losses and risk are technologies with intermediate speed of learning.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 36 (2012)
Issue (Month): 10 ()
Pages: 1462-1476

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Handle: RePEc:eee:dyncon:v:36:y:2012:i:10:p:1462-1476

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Learning-curve technology; Investment timing; Investment size; Real options;

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References

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