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The Fate of Inventions. What can we learn from Bayesian learning in strategic options model of adoption ?

Edouard Civel and Marc Baudry ()

No 2018-47, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: We develop a game where heterogeneous agents have the option of adopting an invention of uncertain quality or postponing their decision to benefit from others' experience through Bayesian learning. Messages produced on the invention nature are noisy, representing the "teething troubles" of innovation. Our model gives microeconomic foundations to the S-shaped innovation diffusion curves, informational externality inducing strategic delay in agents' behavior. Moreover, noise could nip in the bud the diffusion of inventions: numerical simulations underline a bi-modal distribution of steady states for innovation diffusion, stillborn or fully developed, bringing to light a reputational valley of death for inventions.

Keywords: Innovation diffusion; Invention adoption; Information; Strategic options; Bayesian learning. (search for similar items in EconPapers)
JEL-codes: O33 L15 D83 C73 (search for similar items in EconPapers)
Date: 2018
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