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Heterogeneity and the Dynamics of Technology Adoption

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  • Stephen P. Ryan
  • Catherine Tucker

Abstract

We estimate the demand for a videocalling technology in the presence of both network effects and heterogeneity. Using a unique dataset from a large multinational firm, we pose and estimate a fully dynamic model of technology adoption. We propose a novel identification strategy based on post-adoption technology usage to disentangle equilibrium beliefs concerning the evolution of the network from observed and unobserved heterogeneity in technology adoption costs and use benefits. We find that employees have significant heterogeneity in both adoption costs and network benefits, and have preferences for diverse networks. Using our estimates, we evaluate a number of counterfactual adoption policies, and find that a policy of strategically targeting the right subtype for initial adoption can lead to a faster-growing and larger network than a policy of uncoordinated or diffuse adoption.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17253.

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Date of creation: Jul 2011
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Publication status: published as Stephen Ryan & Catherine Tucker, 2012. "Heterogeneity and the dynamics of technology adoption," Quantitative Marketing and Economics, Springer, vol. 10(1), pages 63-109, March.
Handle: RePEc:nbr:nberwo:17253

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Cited by:
  1. Andre Veiga & E. Glen Weyl, 2011. "Multidimensional Heterogeneity and Platform Design," Working Papers, NET Institute 11-33, NET Institute, revised Nov 2011.
  2. Patrick Bajari & C. Lanier Benkard & Jonathan Levin, 2007. "Estimating Dynamic Models of Imperfect Competition," Econometrica, Econometric Society, Econometric Society, vol. 75(5), pages 1331-1370, 09.
  3. Maican, Florin G., 2012. "From Boom to Bust and Back Again: A dynamic analysis of IT services," Working Papers in Economics, University of Gothenburg, Department of Economics 543, University of Gothenburg, Department of Economics.
  4. Wesley Hartmann & Puneet Manchanda & Harikesh Nair & Matthew Bothner & Peter Dodds & David Godes & Kartik Hosanagar & Catherine Tucker, 2008. "Modeling social interactions: Identification, empirical methods and policy implications," Marketing Letters, Springer, Springer, vol. 19(3), pages 287-304, December.
  5. Catherine Tucker, 2011. "Network Stability, Network Externalities and Technology Adoption," NBER Working Papers 17246, National Bureau of Economic Research, Inc.
  6. Matttia De' Grassi Di Pianura, 2012. "Subsidising network technology adoption the case of publishers and E-readers," Working Papers, HAL hal-00714447, HAL.
  7. Daniel Ackerberg & Xiaohong Chen & Jinyong Hahn, 2012. "A Practical Asymptotic Variance Estimator for Two-Step Semiparametric Estimators," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 481-498, May.
  8. Andrew Sweeting, 2007. "Dynamic Product Repositioning in Differentiated Product Markets: The Case of Format Switching in the Commercial Radio Industry," NBER Working Papers 13522, National Bureau of Economic Research, Inc.
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  12. Daniel Ackerberg & Xiaohong Chen & Jinyong Hahn, 2011. "Asymptotic Variance Estimator for Two-Step Semiparametric Estimators," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1803, Cowles Foundation for Research in Economics, Yale University.

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