Technology Choice with Externalities

Volker Böhm () and Luca Colombo
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Volker Böhm: Department of Business Administration and Economics and Center for Mathematical Economics - Bielefeld University - Bielefeld, Germany

Rivista Internazionale di Scienze Sociali, 2023, vol. 131, issue 1, 65-93

Abstract: We examine technology adoption in an economy populated by identical consumers either working as self-employed entrepreneurs, or supplying labor to an industrial sector that consists either of a monopsonistic firm or of several firms competing on wages. Firms are price takers on the goods market and labor is the only input in production besides technology. We show that two sources of non-marketed relations cause inefficient technology choices. Technology adoption exerts a positive externality on workers’ outside options, which in turn induces a negative pecuniary externality, increasing the wage levels required to meet workers’ participation and incentive compatibility constraints.

Keywords: Technology Choice; Production Externalities; Monopsony; Strategic Interactions; Efficiency Wages (search for similar items in EconPapers)
JEL-codes: J41 L20 O31 (search for similar items in EconPapers)
Date: 2023
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