Optimal investment in learning-curve technologies

Marco Della Seta, Sebastian Gryglewicz and Peter Kort

Journal of Economic Dynamics and Control, 2012, vol. 36, issue 10, 1462-1476

Abstract: We study optimal investment in technologies characterized by the learning curve. There are two investment patterns depending on the shape of the learning curve. If the learning process is slow, firms invest relatively late and on a larger scale. If the curve is steep, firms invest earlier and on a smaller scale. We further demonstrate that learning investment differs greatly from investment in technologies without learning effects. Learning investments generate substantial initial losses and are very sensitive to downside risk. We show that the most susceptible to losses and risk are technologies with intermediate speed of learning.

Keywords: Learning-curve technology; Investment timing; Investment size; Real options (search for similar items in EconPapers)
JEL-codes: C61 D92 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:10:p:1462-1476

DOI: 10.1016/j.jedc.2012.03.014

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