Revolutionary Effects of New Information Technologies

Gerard van den Berg

Economic Journal, 2006, vol. 116, issue 509, F10-F28

Abstract: In markets with imperfect information and heterogeneity, the information technology affects the rate at which agents meet, which affects the distribution of production technologies across firms. Multiple equilibria may arise because the reservation utility and the lowest production technology in use affect each other. The adoption of novel information technologies may then entail a revolution in the sense of a move from an inefficient to an efficient equilibrium. Inefficient production technologies are swiftly removed even in sectors where the new information technology has only recently been introduced. The results apply to consumer products, labour, intermediates and institutions. Copyright 2006 Royal Economic Society.

Date: 2006
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