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Disruption costs, learning by doing, and technology adoption

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  • Pérez, Carlos J.
  • Ponce, Carlos J.

Abstract

We study technology adoption in a dynamic model of price competition. Adoption involves disruption costs and learning by doing. Because of disruption costs, the adopting firm begins in a market disadvantage, which may persist if its rival captures the customers that the adopting firm needs to learn the technology. The prospect of future rents by the rival results in: (i) a failure to adopt socially efficient technologies; (ii) an equilibrium preference for technologies that are learned faster but have lower social value; and (iii) more technologies being adopted if more firms enter the market.

Suggested Citation

  • Pérez, Carlos J. & Ponce, Carlos J., 2015. "Disruption costs, learning by doing, and technology adoption," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 64-75.
    • Handle: RePEc:eee:indorg:v:41:y:2015:i:c:p:64-75
    DOI: 10.1016/j.ijindorg.2015.03.010
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    Cited by:

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    More about this item

    Keywords

    Technology adoption; Adoption breakdowns; Dynamic Bertrand competition; Bertrand sum; Discounted Bertrand sum; Endogenous impatience;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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