A percolation model of eco-innovation diffusion: the relationship between diffusion, learning economies and subsidies
AbstractAn obstacle to the widespread adoption of environmentally friendly energy technologies such as stationary and mobile fuel cells is their high upfront costs. While much lower prices seem to be attainable in the future due to learning curve cost reductions that increase rapidly with the scale of diffusion of the technology, there is a chicken and egg problem, even when some consumers may be willing to pay more for green technologies. Drawing on recent percolation models of diffusion by Solomon et al. , Frenken et al.  and Höhnisch et al. , we develop a network model of new technology diffusion that combines contagion among consumers with heterogeneity of agent characteristics. Agents adopt when the price falls below their random reservation price drawn from a lognormal distribution, but only when one of their neighbors has already adopted. Combining with a learning curve for the price as a function of the cumulative number of adopters, this may lead to delayed adoption for a certain range of initial conditions. Using agent-based simulations we explore when a limited subsidy policy can trigger diffusion that would otherwise not happen. The introduction of a subsidy policy seems to be highly effective for a given high initial price level only for learning economies in a certain range. Outside this range, the diffusion of a new technology either never takes off despite the subsidies, or the subsidies are unnecessary. Perhaps not coincidentally, this range seems to correspond to the values observed for many successful innovations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number 025.
Date of creation: 2008
Date of revision:
Contact details of provider:
Web page: http://www.merit.unu.edu
Innovation diffusion; learning economies; percolation; networks; heterogeneous agents; technology subsidies; environmental technologies;
Other versions of this item:
- Simona Cantono & Gerald Silverberg, 2008. "A percolation model of eco-innovation diffusion: the relationship between diffusion, learning economies and subsidies," MERIT Working Papers 025, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-21 (All new papers)
- NEP-ENE-2008-04-21 (Energy Economics)
- NEP-ENV-2008-04-21 (Environmental Economics)
- NEP-INO-2008-04-21 (Innovation)
- NEP-IPR-2008-04-21 (Intellectual Property Rights)
- NEP-MIC-2008-04-21 (Microeconomics)
- NEP-NET-2008-04-21 (Network Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cristiano Antonelli, 1996. "Localized knowledge percolation processes and information networks," Journal of Evolutionary Economics, Springer, vol. 6(3), pages 281-295.
- Solomon, Sorin & Weisbuch, Gerard & de Arcangelis, Lucilla & Jan, Naeem & Stauffer, Dietrich, 2000. "Social percolation models," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 277(1), pages 239-247.
- Silverberg, Gerald & Dosi, Giovanni & Orsenigo, Luigi, 1988. "Innovation, Diversity and Diffusion: A Self-organisation Model," Economic Journal, Royal Economic Society, vol. 98(393), pages 1032-54, December.
- Geroski, Paul A, 1999.
"Models of Technology Diffusion,"
CEPR Discussion Papers
2146, C.E.P.R. Discussion Papers.
- Cowan,Robin, 2004. "Network models of innovation and knowledge diffusion," Research Memoranda 016, Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology.
- Martin Hohnisch & Sabine Pittnauer & Dietrich Stauffer, 2006. "A Percolation-Based Model Explaining Delayed Take-Off in New-Product Diffusion," Bonn Econ Discussion Papers bgse9_2006, University of Bonn, Germany.
- Giulio Cainelli & Massimiliano Mazzanti & Sandro Montresor, 2011.
"Environmental innovations, local networks and internationalization,"
Openloc Working Papers
1108, Public policies and local development.
- Giulio Cainelli & Massimiliano Mazzanti & Sandro Montresor, 2012. "Environmental Innovations, Local Networks and Internationalization," Industry and Innovation, Taylor & Francis Journals, vol. 19(8), pages 697-734, November.
- Giulio Cainelli & Massimiliano Mazzanti & Sandro Montresor, 2011. "Environmental innovations, local networks and internationalization," Working Papers 201101, University of Ferrara, Department of Economics.
- Giulio Cainelli & Massimiliano Mazzanti & Sandro Montresor, 2011. "Environmental Innovations, Local Networks and Internationalization," Working Papers 2011.20, Fondazione Eni Enrico Mattei.
- Cantono, Simona, 2012. "Unveiling diffusion dynamics: an autocatalytic percolation model of environmental innovation diffusion and the optimal dynamic path of adoption subsidies," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201222, University of Turin.
- Vona, Francesco & Patriarca, Fabrizio, 2011.
"Income inequality and the development of environmental technologies,"
Elsevier, vol. 70(11), pages 2201-2213, September.
- Francesco Vona & Fabrizio Patriarca, 2010. "Income Inequality and the Development of Environmental Technologies," Documents de Travail de l'OFCE 2010-22, Observatoire Francais des Conjonctures Economiques (OFCE).
- Frenken, Koen & Silverberg, Gerald & Valente, Marco, 2008.
"A percolation model of the product lifecycle,"
UNU-MERIT Working Paper Series
073, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
- Koen Frenken & Gerald Silverberg & Marco Valente, 2008. "A Percolation Model of the Product Lifecycle," DRUID Working Papers 08-20, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- Frenken, Koen & Silverberg, Gerald & Valente, Marco, 2008. "A percolation model of the product lifecycle," MERIT Working Papers 073, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Albert Faber & Koen Frenken, 2008. "Models in evolutionary economics and environmental policy: Towards an evolutionary environmental economics," Innovation Studies Utrecht (ISU) working paper series 08-15, Utrecht University, Department of Innovation Studies, revised Apr 2008.
- Floris J. Huétink & Alexander van der Vooren & Floortje Alkemade, 2009. "Initial infrastructure development strategies for the transition to sustainable mobility," Innovation Studies Utrecht (ISU) working paper series 09-05, Utrecht University, Department of Innovation Studies, revised Mar 2009.
- Dimitri Gagliardi & Francesco Niglia & Cinzia Battistella, 2012. "Use of multi-level self-regulating agents to evaluate the impact of innovation policy for the agro-food sector in the Region of Puglia, Italy," Openloc Working Papers 1205, Public policies and local development.
- Alessandro Caiani, 2012. "An Agent-Based Model of Schumpeterian Competition," Quaderni di Dipartimento 176, University of Pavia, Department of Economics and Quantitative Methods.
- Cantono Simona, 2012. "A percolation model of multi-technology diffusion: information feedbacks, learning economies and subsidy policy," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201205, University of Turin.
- Paolo Zeppini & Koen Frenken & Luis R. Izquierdo, 2013. "Innovation diffusion in networks: the microeconomics of percolation," Eindhoven Center for Innovation Studies (ECIS) working paper series 13-02, Eindhoven Center for Innovation Studies (ECIS), revised Feb 2013.
- Paolo Zeppini & Koen Frenken & Roland Kupers, 2013. "Threshold models of technological transitions," Eindhoven Center for Innovation Studies (ECIS) working paper series 13-06, Eindhoven Center for Innovation Studies (ECIS), revised Aug 2013.
- Palmer, Johannes & Sorda, Giovanni & Madlener, Reinhard, 2013. "Modeling the Diffusion of Residential Photovoltaic Systems in Italy: An Agent-based Simulation," FCN Working Papers 9/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
- Kindler, A. & Solomon, S. & Stauffer, D., 2013. "Peer-to-peer and mass communication effect on opinion shifts," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(4), pages 785-796.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ad Notten).
If references are entirely missing, you can add them using this form.