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Sequential Research and the Adoption of Innovations

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  • Bhattacharya, Sudipto
  • Chatterjee, Kalyan
  • Samuelson, Larry

Abstract

The authors examine a firm able to adopt an innovation of uncertain profitability; reject the innovation; or delay deciding in order to acquire information on profitability. Deriving the optim al strategy from established sequential sampling literature, the authors constru ct a theory of the diffusion of innovation. Firms are assumed to hold identical prior expectations of an innovation's profitability, and to conduct privately ob served experiments on its profitability. The naturally arising distribution of e xperimental results yields a distribution of adoption times exhibiting establish ed facts on innovation diffusion. Finally the authors examine the implications o f strategic interactions between firms, where this affects both the learning pro cess and the results of adoption. Copyright 1986 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 38 (1986)
Issue (Month): 0 (Suppl. Nov.)
Pages: 219-43

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Handle: RePEc:oup:oxecpp:v:38:y:1986:i:0:p:219-43

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Cited by:
  1. TINA M. Edgar A. Ghossoub, . "Economic Development and the Welfare Costs of Inflation It has been widely observed that the role of money in the ?nancial system varies across developing and advanced countries. While the connections," Working Papers, College of Business, University of Texas at San Antonio 0034, College of Business, University of Texas at San Antonio.
  2. Vesa Kanniainen, 1993. "Optimal production of innovations under uncertainty," Journal of Economics, Springer, Springer, vol. 57(2), pages 147-168, June.
  3. Hirshleifer, David & Teoh, Siew Hong, 2001. "Herd Behavior and Cascading in Capital Markets: A Review and Synthesis," MPRA Paper 5186, University Library of Munich, Germany.
  4. Verkerk, M. & van der Pijl, G.J. & van Asperen, E., 2009. "ICT as an Enabler for Innovation Adoption," Econometric Institute Research Papers, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute EI 2009-15, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  5. Fabiano Schivardi & Martin Schneider, 2008. "Strategic Experimentation and Disruptive Technological Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 386-412, April.
  6. Dutta, J. & Prasad, K., 1993. "Learning by Observation Within the Firm," Working Papers, Department of Economics, Florida State University 1993_07_03, Department of Economics, Florida State University.
  7. Farzin, Y.H. & Huisman, K.J.M. & Kort, P.M., 1996. "Optimal Timing of Technology Adoption," Discussion Paper, Tilburg University, Center for Economic Research 1996-72, Tilburg University, Center for Economic Research.
  8. Karaaslan, Mehmet E., 2007. "Monopoly, Diversification through Adjacent Technologies, and Market Structure," MPRA Paper 7607, University Library of Munich, Germany.
  9. Bolton, P. & Harris, C., 1996. "Strategic Experimentation: A Revision," Discussion Paper, Tilburg University, Center for Economic Research 1996-27, Tilburg University, Center for Economic Research.
  10. Alvarez, Luis H. R. & Stenbacka, Rune, 2001. "Adoption of uncertain multi-stage technology projects: a real options approach," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 35(1), pages 71-97, February.
  11. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany.
  12. John C. Persons & Vincent A. Warther, . "Boom and Bust Patterns in the Adoption of Financial Innovations," Research in Financial Economics, Ohio State University 9601, Ohio State University.
  13. Doraszelski, Ulrich, 2004. "Innovations, improvements, and the optimal adoption of new technologies," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 28(7), pages 1461-1480, April.

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