The Simple Analytics of Technology Adoption: Bovine Growth Hormone and the Dairy Industry

Bruce A. Larson and Fred Kuchler

Review of Agricultural Economics, 1990, vol. 12, issue 1, 109-123

Abstract: Economic simulation studies of the effects of bovine growth hormone (bGH) on the dairy industry usually assume that producers will have the incentive to adopt bGH and that aggregate milk supply will increase. Based on the description of per-cow milk yield response to bovine growth hormone (bGH), a short-run model of milk production is developed to analyze the farm-level incentives to adopt bGH. This analysis emphasizes that the incentives to adopt a new technology greatly depend on how it alters the existing production environment. Because higher levels of energy are needed in the cow to attain greater levels of production made possible with bGH, those farmers who can most easily and inexpensively expand energy levels in the cow will be most likely to adopt. The model identifies: (1) why farmers may not have the incentive to adopt the new technology; and (2) if farmers adopt bGH, they may not have the economic incentive to produce at the levels obtained in test studies.

Date: 1990
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