IDEAS home Printed from https://ideas.repec.org/p/cwl/cwldpp/1988.html
   My bibliography  Save this paper

Innovation Adoption by Forward-Looking Social Learners

Author

Listed:

Abstract

Motivated by the rise of social media, we build a model studying the effect of an economy�s potential for social learning on the adoption of innovations of uncertain quality. Provided consumers are forward-looking (i.e., recognize the value of waiting for information), equilibrium dynamics depend non-trivially on qualitative and quantitative features of the informational environment. We identify informational environments that are subject to a saturation effect, whereby increased opportunities for social learning can slow down adoption and learning and do not increase consumer welfare. We also suggest a novel, purely informational explanation for different commonly observed adoption curves (S-shaped vs. concave).

Suggested Citation

  • Mira Frick & Yuhta Ishii, 2015. "Innovation Adoption by Forward-Looking Social Learners," Cowles Foundation Discussion Papers 1877, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1988
    as

    Download full text from publisher

    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d19/d1988.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jovanovic, Boyan & Lach, Saul, 1989. "Entry, Exit, and Diffusion with Learning by Doing," American Economic Review, American Economic Association, vol. 79(4), pages 690-699, September.
    2. Nicolas Klein & Sven Rady, 2011. "Negatively Correlated Bandits," Review of Economic Studies, Oxford University Press, vol. 78(2), pages 693-732.
    3. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
    4. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
    5. Geroski, P. A., 2000. "Models of technology diffusion," Research Policy, Elsevier, vol. 29(4-5), pages 603-625, April.
    6. Godfrey Keller & Sven Rady & Martin Cripps, 2005. "Strategic Experimentation with Exponential Bandits," Econometrica, Econometric Society, vol. 73(1), pages 39-68, January.
    7. Bergemann, Dirk & Hege, Ulrich, 1998. "Venture capital financing, moral hazard, and learning," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 703-735, August.
    8. Oriana Bandiera & Imran Rasul, 2006. "Social Networks and Technology Adoption in Northern Mozambique," Economic Journal, Royal Economic Society, vol. 116(514), pages 869-902, October.
    9. Johannes Hörner & Larry Samuelson, 2013. "Incentives for experimenting agents," RAND Journal of Economics, RAND Corporation, vol. 44(4), pages 632-663, December.
    10. Dinah Rosenberg & Eilon Solan & Nicolas Vieille, 2007. "Social Learning in One-Arm Bandit Problems," Econometrica, Econometric Society, vol. 75(6), pages 1591-1611, November.
    11. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
    12. W. Bentley MacLeod, 2007. "Reputations, Relationships, and Contract Enforcement," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 595-628, September.
    13. Luís Cabral, 2012. "Lock in and switch: Asymmetric information and new product diffusion," Quantitative Marketing and Economics (QME), Springer, vol. 10(3), pages 375-392, September.
    14. repec:cwl:cwldpp:1726rrr is not listed on IDEAS
    15. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-1085, September.
    16. Timothy G. Conley & Christopher R. Udry, 2010. "Learning about a New Technology: Pineapple in Ghana," American Economic Review, American Economic Association, vol. 100(1), pages 35-69, March.
    17. Simon Board & Moritz Meyer‐ter‐Vehn, 2013. "Reputation for Quality," Econometrica, Econometric Society, vol. 81(6), pages 2381-2462, November.
    18. Halac, Marina & Prat, Andrea, 2014. "Managerial Attention and Worker Engagement," CEPR Discussion Papers 10035, C.E.P.R. Discussion Papers.
    19. Alessandro Bonatti & Johannes Horner, 2011. "Collaborating," American Economic Review, American Economic Association, vol. 101(2), pages 632-663, April.
    20. Davies, Stephen W., 1979. "Inter-firm diffusion of process innovations," European Economic Review, Elsevier, vol. 12(4), pages 299-317, October.
    21. repec:cwl:cwldpp:1726rr is not listed on IDEAS
    22. , & ,, 2010. "Strategic experimentation with Poisson bandits," Theoretical Economics, Econometric Society, vol. 5(2), May.
    23. Frank M. Bass, 1969. "A New Product Growth for Model Consumer Durables," Management Science, INFORMS, vol. 15(5), pages 215-227, January.
    24. Munshi, Kaivan, 2004. "Social learning in a heterogeneous population: technology diffusion in the Indian Green Revolution," Journal of Development Economics, Elsevier, vol. 73(1), pages 185-213, February.
    25. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 612-643, August.
    26. Jensen, Richard, 1982. "Adoption and diffusion of an innovation of uncertain profitability," Journal of Economic Theory, Elsevier, vol. 27(1), pages 182-193, June.
    27. Pauli Murto & Juuso Välimäki, 2011. "Learning and Information Aggregation in an Exit Game," Review of Economic Studies, Oxford University Press, vol. 78(4), pages 1426-1461.
    28. Massoud Karshenas & Paul L. Stoneman, 1993. "Rank, Stock, Order, and Epidemic Effects in the Diffusion of New Process Technologies: An Empirical Model," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 503-528, Winter.
    29. Kapur, Sandeep, 1995. "Technological Diffusion with Social Learning," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 173-195, June.
    30. Bruno Strulovici, 2010. "Learning While Voting: Determinants of Collective Experimentation," Econometrica, Econometric Society, vol. 78(3), pages 933-971, May.
    31. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    32. Marina Halac & Navin Kartik & Qingmin Liu, 2016. "Optimal Contracts for Experimentation," Review of Economic Studies, Oxford University Press, vol. 83(3), pages 1040-1091.
    33. Rui Baptista, 1999. "The Diffusion of Process Innovations: A Selective Review," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(1), pages 107-129.
    34. Besley, Timothy & Case, Anne, 1993. "Modeling Technology Adoption in Developing Countries," American Economic Review, American Economic Association, vol. 83(2), pages 396-402, May.
    35. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-653, September.
    36. Guenthner, Joseph F. & Lin, Biing-Hwan & Levi, Annette E., 1991. "The Influence Of Microwave Ovens On The Demand For Fresh And Frozen Potatoes," Journal of Food Distribution Research, Food Distribution Research Society, vol. 22(3), pages 1-8, September.
    37. H. Peyton Young, 2009. "Innovation Diffusion in Heterogeneous Populations: Contagion, Social Influence, and Social Learning," American Economic Review, American Economic Association, vol. 99(5), pages 1899-1924, December.
    38. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marina Halac & Ilan Kremer, 2020. "Experimenting with Career Concerns," American Economic Journal: Microeconomics, American Economic Association, vol. 12(1), pages 260-288, February.
    2. Daniela Balutel & Christopher Henry & Jorge Vásquez & Marcel Voia, 2022. "Bitcoin adoption and beliefs in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(4), pages 1729-1761, November.
    3. Osnat Zohar, 2019. "Boom-Bust Cycles of Learning, Investment and Disagreement," Bank of Israel Working Papers 2019.06, Bank of Israel.
    4. Thomas, Caroline, 2019. "Experimentation with reputation concerns – Dynamic signalling with changing types," Journal of Economic Theory, Elsevier, vol. 179(C), pages 366-415.
    5. Ay?e Gül Mermer & Sander Onderstal & Joep Sonnemans, 2022. "Can Communication Mitigate Strategic Delays in Investment Timing?," Tinbergen Institute Discussion Papers 22-065/I, Tinbergen Institute.
    6. Julio A. Crego & Jin Huang, 2017. "Early Birds and Second Mice in the Stock Market," Working Papers wp2018_1717, CEMFI.
    7. Jin Huang, 2017. "To Glance or to Peruse: Observational and Active Learning from Peer Consumers," Working Papers wp2017_1716, CEMFI.
    8. Fudenberg, Drew & He, Kevin, 2021. "Player-compatible learning and player-compatible equilibrium," Journal of Economic Theory, Elsevier, vol. 194(C).
    9. Kolb, Aaron M., 2019. "Strategic real options," Journal of Economic Theory, Elsevier, vol. 183(C), pages 344-383.
    10. Jin Huang, 2017. "To Glance or to Peruse: Observational and Active Learning from Peer Consumers," Working Papers wp2018_1716, CEMFI.
    11. Aleksei Smirnov & Egor Starkov, 2022. "Bad News Turned Good: Reversal under Censorship," American Economic Journal: Microeconomics, American Economic Association, vol. 14(2), pages 506-560, May.
    12. Gustavo Manso & Farzad Pourbabaee, 2022. "The Impact of Connectivity on the Production and Diffusion of Knowledge," Papers 2202.00729, arXiv.org.
    13. Julio A. Crego & Jin Huang, 2017. "Early Birds and Second Mice in the Stock Market," Working Papers wp2017_1717, CEMFI.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. H. Peyton Young, 2009. "Innovation Diffusion in Heterogeneous Populations: Contagion, Social Influence, and Social Learning," American Economic Review, American Economic Association, vol. 99(5), pages 1899-1924, December.
    2. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    3. Wagner, Peter A. & Klein, Nicolas, 2022. "Strategic investment and learning with private information," Journal of Economic Theory, Elsevier, vol. 204(C).
    4. Xiong, Hang & Payne, Diane & Kinsella, Stephen, 2016. "Peer effects in the diffusion of innovations: Theory and simulation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 63(C), pages 1-13.
    5. Geroski, P. A., 2000. "Models of technology diffusion," Research Policy, Elsevier, vol. 29(4-5), pages 603-625, April.
    6. Comin, Diego & Mestieri, Martí, 2014. "Technology Diffusion: Measurement, Causes, and Consequences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 2, pages 565-622, Elsevier.
    7. Lamberson PJ, 2010. "Social Learning in Social Networks," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-33, August.
    8. Daron Acemoglu & Munther A. Dahleh & Ilan Lobel & Asuman Ozdaglar, 2011. "Bayesian Learning in Social Networks," Review of Economic Studies, Oxford University Press, vol. 78(4), pages 1201-1236.
    9. Oriana Bandiera & Imran Rasul, 2006. "Social Networks and Technology Adoption in Northern Mozambique," Economic Journal, Royal Economic Society, vol. 116(514), pages 869-902, October.
    10. Camargo, Braz, 2014. "Learning in society," Games and Economic Behavior, Elsevier, vol. 87(C), pages 381-396.
    11. Chen, Chia-Hui & Ishida, Junichiro, 2018. "Hierarchical experimentation," Journal of Economic Theory, Elsevier, vol. 177(C), pages 365-404.
    12. Feng, Yao, 2011. "Local spillovers and learning from neighbors: Evidence from durable adoptions in rural China," MPRA Paper 33924, University Library of Munich, Germany.
    13. B Kelsey Jack, "undated". "Market Inefficiencies and the Adoption of Agricultural Technologies in Developing Countries," CID Working Papers 50, Center for International Development at Harvard University.
    14. Stephanie De Mel & Kaivan Munshi & Soenje Reiche & Hamid Sabourian, 2021. "Herding with Heterogeneous Ability: An Application to Organ Transplantation," Cowles Foundation Discussion Papers 2308, Cowles Foundation for Research in Economics, Yale University.
    15. Yamauchi, Futoshi, 2007. "Social learning, neighborhood effects, and investment in human capital: Evidence from Green-Revolution India," Journal of Development Economics, Elsevier, vol. 83(1), pages 37-62, May.
    16. 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.
    17. Cripps, Martin W. & Thomas, Caroline D., 2019. "Strategic experimentation in queues," Theoretical Economics, Econometric Society, vol. 14(2), May.
    18. Guo, Xiaoli & Ryvkin, Dmitry, 2022. "When is intergroup herding beneficial?," Mathematical Social Sciences, Elsevier, vol. 120(C), pages 66-77.
    19. Forand, Jean Guillaume, 2015. "Keeping your options open," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 47-68.

    More about this item

    Keywords

    Innovation adoption; Social learning; Poisson bandits; Informational free-Riding;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cwl:cwldpp:1988. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/cowleus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Brittany Ladd (email available below). General contact details of provider: https://edirc.repec.org/data/cowleus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.