Technology adoption under imperfect information
This article presents a static game-theoretic model of a firm's decision to adopt a technological innovation of uncertain profitability. Given the levels of adoption costs, discount rates, and expectations regarding the profitability of the innovation, the author determines the (Nash equilibrium) range of initial production costs for which each firm prefers to adopt the innovation. She shows that if initial costs are sufficiently dissimilar, then it is the high-cost firm which adopts the new technology, while the low-cost firm eschews adoption. An increase in a firm's adoption cost (or equivalently, a decrease in the firm's discount rate) makes that firm no more likely to adopt the new technology, while the rival firm may be more or less likely to adopt, depending upon the initial values of the parameters. 7 references, 3 figures.
- Research Organization:
- California Inst. of Tech., Pasadena
- OSTI ID:
- 5910893
- Journal Information:
- Bell J. Econ.; (United States), Journal Name: Bell J. Econ.; (United States) Vol. 14:1; ISSN BJECD
- Country of Publication:
- United States
- Language:
- English
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