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Dynamic Modelling of Innovation Process Adoption with Risk Aversion and Learning

Author

Listed:
  • Tsur, Yacov
  • Sternberg, Menachem
  • Hochman, Eithan

Abstract

This paper presents a model that incorporates dynamic factors of how firms decide on the adoption of an innovation process. Two factors in particular are considered: learning by using and expectations about future prices of the innovation. The firm's diffusion path is derived from a dynamic optimization task allowing for the decisionmakers to be risk averse. The paper investigates the effects of risk aversion, learning, and firm size. Various properties of the model are illustrated numerically. Copyright 1990 by Royal Economic Society.

Suggested Citation

  • Tsur, Yacov & Sternberg, Menachem & Hochman, Eithan, 1990. "Dynamic Modelling of Innovation Process Adoption with Risk Aversion and Learning," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 336-355, April.
  • Handle: RePEc:oup:oxecpp:v:42:y:1990:i:2:p:336-55
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    Cited by:

    1. Mills, Bradford F. & Schleich, Joachim, 2010. "Why don't households see the light?: Explaining the diffusion of compact fluorescent lamps," Resource and Energy Economics, Elsevier, vol. 32(3), pages 363-378, August.
    2. Abadi Ghadim, Amir K. & Pannell, David J., 1999. "A conceptual framework of adoption of an agricultural innovation," Agricultural Economics, Blackwell, vol. 21(2), pages 145-154, October.
    3. Lücke, Matthias, 1992. "Technischer Fortschritt und die Arbeitsteilung zwischen Industrie- und Entwicklungsländern: eine empirische Analyse," Open Access Publications from Kiel Institute for the World Economy 758, Kiel Institute for the World Economy (IfW).
    4. Dimara, Efthalia & Skuras, Dimitrios, 1998. "Adoption of new tobacco varieties in Greece: Impacts of empirical findings on policy design," Agricultural Economics, Blackwell, vol. 19(3), pages 297-307, December.
    5. Schleich, Joachim & Gassmann, Xavier & Faure, Corinne & Meissner, Thomas, 2016. "Making the implicit explicit: A look inside the implicit discount rate," Energy Policy, Elsevier, vol. 97(C), pages 321-331.
    6. Jabbar, Mohammad A. & Beyene, Hailu & Mohamed Saleem, M A & Gebreselassie, Solomon, 1998. "Adoption pathways for new agricultural technologies : An approach and an application to Vertisols management technology in Ethiopia," Research Reports 182901, International Livestock Research Institute.
    7. Llewellyn, Rick S. & Lindner, Robert K. & Pannell, David J. & Powles, Stephen B., 2003. "Effective information and the influence of an extension event on perceptions and adoption," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57911, Australian Agricultural and Resource Economics Society.
    8. Cuntz, Alexander & Czernich, Nina & Dauchert, Helge & Meurer, Petra & Philipps, Annika, 2015. "Gesellschaftliche Dimensionen von Innovation: Zentrale Fragen und Datenlage," Studien zum deutschen Innovationssystem 18-2015, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin.
    9. Floridi, Matteo & Bartolini, Fabio & Peerlings, Jack & Polman, Nico & Viaggi, Davide, 2013. "Modelling the adoption of automatic milking systems in Noord-Holland," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 1, April.
    10. Abdulla, Majd, 2009. "The impact of ownership on Iowa land owners' decisions to adopt conservation practices," ISU General Staff Papers 200901010800001913, Iowa State University, Department of Economics.
    11. Francesco Bogliacino & Giorgio Rampa, 2010. "Monopolistic competition and new products: a conjectural equilibrium approach," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 5(1), pages 55-76, June.
    12. Konstantinos Chatzimichael & Dimitris Christopoulos & Spyro Stefanou & Vangelis Tzouvelekas, 2015. "Irrigation Technology Adoption, Water Effectiveness and Productivity Measurement," Working Papers 1506, University of Crete, Department of Economics.
    13. Francesco Bogliacino & Giorgio Rampa, 2012. "Quality risk aversion, conjectures, and new product diffusion," Journal of Evolutionary Economics, Springer, vol. 22(5), pages 1081-1115, November.
    14. Marra, Michele & Pannell, David J. & Abadi Ghadim, Amir, 2003. "The economics of risk, uncertainty and learning in the adoption of new agricultural technologies: where are we on the learning curve?," Agricultural Systems, Elsevier, vol. 75(2-3), pages 215-234.
    15. Smale, Melinda & Bellon, Mauricio R. & Gomez, Jose Alfonso Aguirre, 1999. "The Private and Public Characteristics of Maize Land Races and the Area Allocation Decisions of Farmers in a Center of Crop Diversity," Economics Working Papers 7669, CIMMYT: International Maize and Wheat Improvement Center.
    16. John C. Persons & Vincent A. Warther, "undated". "Boom and Bust Patterns in the Adoption of Financial Innovations," Research in Financial Economics 9601, Ohio State University.
    17. Pannell, David J., 1999. "Uncertainty and Adoption of Sustainable Farming Systems," 1999 Conference (43th), January 20-22, 1999, Christchurch, New Zealand 124511, Australian Agricultural and Resource Economics Society.
    18. Javad Torkamani & Shahrokh Shajari, 2008. "Adoption of New Irrigation Technology Under Production Risk," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 22(2), pages 229-237, February.
    19. David Popp, 2010. "Exploring Links Between Innovation and Diffusion: Adoption of NO X Control Technologies at US Coal-fired Power Plants," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(3), pages 319-352, March.
    20. Jinxia Wang & Henning Bjornlund & K. K. Klein & Lijuan Zhang & Wencui Zhang, 2016. "Factors that Influence the Rate and Intensity of Adoption of Improved Irrigation Technologies in Alberta, Canada," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(03), pages 1-32, September.

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