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Innovation Adoption and Welfare under Uncertainty

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  • Jensen, Richard

Abstract

The incentives of firms to adopt a new process need not coincide with maximum expected consumer surplus or social welfare if there is uncertainty before the process is adopted and if the only loss from failure is a fixed cost. In some cases, no firm will adopt an innovation likely to fail, although expected welfare is maximized if one adopts. In other cases, both firms will adopt an innovation likely to succeed, although expected welfare is maximized if one firm adopts. This occurs because rivalry between firms leads them to adopt together when total expected profits are higher if one firm adopts. Copyright 1992 by Blackwell Publishing Ltd.

Suggested Citation

  • Jensen, Richard, 1992. "Innovation Adoption and Welfare under Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 173-180, June.
  • Handle: RePEc:bla:jindec:v:40:y:1992:i:2:p:173-80
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    Cited by:

    1. Thijssen, J.J.J., 2003. "Investment under uncertainty, market evolution and coalition spillovers in a game theoretic perspective," Other publications TiSEM 672073a6-492e-4621-8d4a-0, Tilburg University, School of Economics and Management.
    2. Asma Raies, 2004. "Innovation, learning and productivity improvement in developing countries: a dynamic model of technological adoption and industry evolution," Cahiers de la Maison des Sciences Economiques bla04112, Université Panthéon-Sorbonne (Paris 1).
    3. Jacco Thijssen & Kuno Huisman & Peter Kort, 2006. "The effects of information on strategic investment and welfare," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(2), pages 399-424, June.
    4. Zhang, Yanfang, 2020. "When should firms choose a risky new technology? An oligopolistic analysis," Economic Modelling, Elsevier, vol. 91(C), pages 687-693.
    5. Hoppe, Heidrun C., 2000. "Second-mover advantages in the strategic adoption of new technology under uncertainty," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 315-338, February.
    6. Krishnendu Ghosh Dastidar, 2015. "Nature of Competition and New Technology Adoption," Pacific Economic Review, Wiley Blackwell, vol. 20(5), pages 696-732, December.
    7. 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.
    8. John C. Strandholm, 2020. "Promotion of Green Technology under Different Environmental Policies," Games, MDPI, Open Access Journal, vol. 11(3), pages 1-23, August.
    9. Amihai Glazer, 2008. "Bargaining with Rent Seekers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 859-871, October.
    10. Pal, Rupayan, 2010. "Technology adoption in a differentiated duopoly: Cournot versus Bertrand," Research in Economics, Elsevier, vol. 64(2), pages 128-136, June.
    11. Dilaver, Özge, 2014. "Involuntary technology adoptions: How consumer interdependencies lead to societal change," Structural Change and Economic Dynamics, Elsevier, vol. 31(C), pages 138-148.
    12. Mariana Cunha & Paula Sarmento & Hélder Vasconcelos, 2014. "Uncertain Efficiency Gains and Merger Policy," FEP Working Papers 527, Universidade do Porto, Faculdade de Economia do Porto.
    13. raies, asma, 2006. "The impacts of technological change, industry structure and Plant entry/exit on industry efficiency growth," MPRA Paper 9546, University Library of Munich, Germany.
    14. Arghya Ghosh & Munirul Nabin Haque, 2006. "Sequential technology adoption with asymmetric firms," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(2), pages 157-172.
    15. Lyon, Thomas P. & Huang, Haizhou, 1997. "Innovation and imitation in an asymmetrically-regulated industry," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 29-50, February.
    16. Yanfang Zhang & Shue Mei & Weijun Zhong, 2014. "New technology adoption in a Cournot oligopoly with spillovers," Journal of Economics, Springer, vol. 112(2), pages 115-136, June.

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