Technology adoption, social learning, and economic policy

Paul Heidhues () and Nicolas Melissas

No ESMT-10-007, ESMT Research Working Papers from ESMT European School of Management and Technology

Abstract: We study a two-player dynamic investment model with information externalities and provide necessary and sufficient conditions for a unique switching equilibrium. Within this setup, we ask whether policymakers should interfere when better informed agents make individual investment decisions. We find that when the public information is sufficiently high and a social planer therefore expects an investment boom, investments should be taxed. Conversely, any positive investment tax is suboptimally high if the public information is sufficiently unfavorable. We also show that an investment tax may increase overall investment activity.

Keywords: information externality; strategic waiting; delay; information cascade; investment boom; optimal taxation (search for similar items in EconPapers)
JEL-codes: D62 D83 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2010-11-17
New Economics Papers: this item is included in nep-cta
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Citations: View citations in EconPapers (1)

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http://static.esmt.org/publications/workingpapers/ESMT-10-007.pdf First version, 2010 (application/pdf)

Related works:
Working Paper: Technology Adoption, Socila Learning, and Economic Policy (2010)
Working Paper: Technology Adoption, Social Learning, and Economic Policy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:esm:wpaper:esmt-10-007

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