Technology Adoption Under Imperfect Information

Bell Journal of Economics, 1983, vol. 14, issue 1, pages 57-69

Abstract: 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, we determine the (Nash equilibrium) range of initial production costs for which each firm prefers to adopt the innovation. We show 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.

View citations in EconPapers

Downloads: (external link)
http://links.jstor.o ... O%3B2-Y&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: Technology Adoption Under Imperfect Information (1981)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This journal article can be ordered from
http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi

Access Statistics for this article

More articles in Bell Journal of Economics from The RAND Corporation
Series data maintained by ().