Technology Adoption Under Imperfect Information
AbstractThis article presents a static game theoretic model of a firm's decision to adopt a technological innovation of uncertain profitability. Given the levels of adoption costs, discount rates, and expectations regarding the profitability of the innovation, we determine the (Nash equilibrium) range of initial production costs for which each firm prefers to adopt the innovation. We show that if initial costs are sufficiently dissimilar, then it is the high-cost firm which adopts the new technology, while the low-cost firm eschews adoption. An increase in a firm's adoption cost (or equivalently, a decrease in the firm's discount rate) makes that firm no more likely to adopt the new technology, while the rival firm may be more or less likely to adopt, depending upon the initial values of the parameters.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal Bell Journal of Economics.
Volume (Year): 14 (1983)
Issue (Month): 1 (Spring)
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- David A. Miller, 2005.
"Invention under uncertainty and the threat of ex post entry,"
- Miller, David A., 2008. "Invention under uncertainty and the threat of ex post entry," European Economic Review, Elsevier, vol. 52(3), pages 387-412, April.
- James G. Mulligan & Nilotpal Das, 2004. "Vintage Effects and the Diffusion of Time-Saving Technological Innovations: The Adoption of Optical Scanners by U.S. Supermarkets."," Working Papers 04-06, University of Delaware, Department of Economics.
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