Optimal Adoption of Complementary Technologies

Dmitriy Stolyarov and Boyan Jovanovic ()

American Economic Review, 2000, vol. 90, issue 1, 15-29

Abstract: When a production process requires two extremely complementary inputs, conventional wisdom holds that a firm would always upgrade them simultaneously. We show, however, that if upgrading each input involves a fixed cost, the firm may upgrade them at different dates, "asynchronously." This insight helps us understand why productivity rises with the age of a plant, why investment in structures is more spiked than equipment investment, and why plants have spare capacity. The bigger point of the paper is that complementarity does not necessarily imply comovement--not even for a single decision maker.

JEL-codes: D24 E22 G31 O33 (search for similar items in EconPapers)
Date: 2000
Note: DOI: 10.1257/aer.90.1.15
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Citations: View citations in EconPapers (41)

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Working Paper: Optimal Adoption of Complementary Technologies (1997)
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