Technology adoption under uncertainty in general equilibrium

Julien Hugonnier, Erwan Morellec and Aude Pommeret ()

No 692, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: Investment is often irreversible, especially at the aggregate level. This paper proposes and solves a general equilibrium model of technology adotpion when investment in the new technlogy is irreversible. In contrast to prior research, we consider a setup where the returns on technology adoption are uncertain. We find that even without learning by doing it may be optimal for the representative agent to wait before acquiring the technlogy. We relate the timing of technology adoption to the risk aversion of the representative agent and demonstrate that the value of waiting to invest quickly disappears with the introduction of risk aversion in an equilibrium framework

Keywords: General equilibrium; technology adoption; uncertainty (search for similar items in EconPapers)
JEL-codes: G10 G31 O40 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:red:sed006:692

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