TECHNOLOGY ADOPTION AND ADAPTATION TO CLIMATE CHANGE — A CASE-BASED APPROACH

Jürgen Eichberger () and Ani Guerdjikova ()
Additional contact information
Jürgen Eichberger: University of Heidelberg, Alfred Weber Institute, Grabengasse 14, 69117 Heidelberg, Germany
Ani Guerdjikova: THEMA, University of Cergy-Pontoise, 33 bd. du Port, 95011 Cergy-Pontoise, France

Climate Change Economics (CCE), 2012, vol. 03, issue 02, 1-41

Abstract: We present a model of technological adaptation in response to a change in climate conditions. The main feature of the model is that new technologies are not just risky, but also ambiguous. Pessimistic agents are thus averse to adopting a new technology. Learning is induced by optimists, who are willing to try out technologies about which there is little evidence available. We show that both optimists and pessimists are crucial for a successful adaptation. While optimists provide the public good of information which gives pessimists an incentive to innovate, pessimists choose the new technology persistently in the long-run which increases the average returns for the society. Hence, the optimal share of optimists in the society is strictly positive. When the share of optimists in the society is too low, innovation is slow and the obtained steady-state is inefficient. We discuss two policies which can potentially alleviate this inefficiency: Subsidies and provision of additional information. We show that if precise and relevant information is available, pessimists would be willing to pay for it and consequently adopt the new technology. Hence, providing information might be a more efficient policy, which is both self-financing and results in better social outcomes.

Keywords: Climate change; adaptation; technology adoption; case-based decision throry; ambiguity; learning; optimism; pessimism (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2010007812500078
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ccexxx:v:03:y:2012:i:02:n:s2010007812500078

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2010007812500078

Access Statistics for this article

Climate Change Economics (CCE) is currently edited by Robert Mendelsohn

More articles in Climate Change Economics (CCE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().