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Green technology adoption under uncertainty, increasing returns, and complex adaptive dynamics

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  • Dhami, Sanjit
  • Zeppini, Paolo

Abstract

We consider firms’ choices between a clean technology that benefits, and a dirty technology that harms, the environment. Green firms are more suited to the clean technology and brown firms are more suited to the dirty technology. We use a model derived from complexity theory that takes account of true uncertainty and increasing returns to technology adoption. We examine theoretically, the properties of the long-run equilibrium, and provide simulated time paths of technology adoption, using plausible dynamics. The long-run outcome is an ‘emergent property’ of the system, and is unpredictable despite there being no external technological or preference shocks. We describe the role of taxes and subsidies in facilitating adoption of the clean technology; the conflict between optimal Pigouvian taxes and adoption of clean technologies; the optimal temporal profile of subsidies; and the desirability of an international fund to provide technology assistance to poorer countries.

Suggested Citation

  • Dhami, Sanjit & Zeppini, Paolo, 2025. "Green technology adoption under uncertainty, increasing returns, and complex adaptive dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 233(C).
    • Handle: RePEc:eee:jeborg:v:233:y:2025:i:c:s0167268125000733
    DOI: 10.1016/j.jebo.2025.106953
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    Keywords

    Technology choice; Climate change; Complexity; Lock-in effects; Increasing returns; Green subsidies; Public policy; Pigouvian taxes; Stochastic dynamics;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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