irreversible choice of uncertain technologies with network externalities in this article i explore the problem of sequential and irreversible technology choice in the presence of network externalities when the technologies stochastically evolve over time early potential users are shown to adopt an irreversible technology too early compared to the social optimum the effect of increasing the uncertainty of the technologies on an early potential user s decision is analyzed i find that the sponsor of new emerging technology might choose a research strategy that is too safe i also study the consequences of allowing side payments between generations of consumers and demonstrate that an ex post optimal standardization policy can impair ex ante social welfare

discrete equilibrium price dispersion an explicit solution of an equilibrium model with price setting firms and searching customers makes possible a number of comparativestatics predictions about how cost differences among firms search costs of customers and taxes will affect the mean and variance of the distribution of market prices another implication of the model is that a firm s demand depends on the difference between its price and the average price in the market

technological advancement learning and the adoption of new technology abstract this research focuses attention upon three related issues the persistence of technological progress over time multiple adoption decisions over a long horizon and the impact of production based learning on those decisions we develop a simple economic model for a single product producing firm incorporating continuous technological progress linear product demand linear switching costs and experience based cost reductions a dynamic programming framework is used to evaluate cases where either one or an unlimited number of adoptions are allowed over an infinite horizon both structural and numerical results are presented fundamental results serve to explain several counter intuitive dynamics in the single adoption case faster rates of technological progress as well as growing markets or a steeply sloping demand curve serve to delay adoption while an increased ability to learn may accelerate it when multiple adoptions are allowed the adoption of any particular technology presents a window of opportunity in which future investment will be warranted if for whatever reason this window has passed then maintaining the older technology becomes more attractive than adoption thus seemingly outdated technologies may remain embedded in some settings

technological expectations and adoption of improved technology abstract attention is focused upon the adoption demand rather than the creation supply of new technology which improves from time to time based on the expected flow of technological progress over which the firm demander has no control it must decide either to adopt the current best available technology or to postpone adoption the distinguishing features of the model are that more than one technological innovation is anticipated and expectations about the likelihood of such innovations are revised as time passes since the last innovation our analysis shows that the firm will adopt the current best practice if its technological lag exceeds a certain threshold moreover as time passes without new technological advances it may become profitable to purchase a technology that has been available even though it was not profitable to do so in the past

sequential investment in renewable energy technologies under policy uncertainty although innovation and support schemes are among the main forces that drive investment in renewable energy re technologies both involve considerable uncertainty we develop a real options framework to analyse the impact of technological policy and electricity price uncertainty on the decision to invest sequentially in successively improved versions of a re technology technological uncertainty is reflected in the random arrival of innovations and policy uncertainty in the likely provision or retraction of a subsidy that takes the form of a fixed premium on top of the electricity price we show that greater likelihood of subsidy retraction provision lowers raises the incentive to invest and by comparing a stepwise to a lumpy investment strategy we show how an embedded option to adopt an improved technology version mitigates the impact of subsidy retraction on investment timing specifically we show how stepwise investment facilitates earlier technology adoption compared to lumpy investment and that under stepwise investment technological uncertainty accelerates technology adoption thus further offsetting the incentive to delay investment in the light of subsidy retraction

economic aspects of anti dumping policies the common sense view of dumping is that it is an unfair trading practice against which nations should legitimately be able to introduce countervailing measures no government can be expected to stand by whilst its markets are flooded by foreign imports whose prices are kept artificially low in relation to the price of the product on its own tariff protected domestic market it is this type of unfair trading advantage which anti dumping legislation is designed to combat stanbrook 1980 in line with this view article vi of the general agreement on tariffs and trade gatt permits importing countries to impose anti dumping duties in appropriate circumstances normal gatt obligations notwithstanding although it is interesting to note that the practice of dumping is not in itself contrary to any of the gatt rules as a result individual nations and trading blocks have developed extensive anti dumping laws and regulations that are broadly consistent with article vi and with the associated gatt anti dumping code which interprets the provisions of article vi and elaborates rules for their application

multiproduct equilibrium price dispersion abstract the model of burdett and judd econometrica51 1993 955 969 is generalized to the case of may goods consumers choose the best price observed for each good there are two classes of equilibria those that involve constant expected profits for each good independently of price and those with increasing profits for each good in price a continuum of the latter type always exists these equilibria are qualitatively different than the unique equilibrium of the single good case journal of economic literature classification numbers d83 d43 l13

information capacity and innovation adoption researchers of innovation adoption and diffusion often have tested the hypothesis that firms with greater capacities to gather and evaluate information should adopt sooner however the data generally do not support this hypothesis a theoretical model of innovation adoption under uncertainty is developed to show that greater information capacity implies not only faster learning which tends to reduce the expected delay until adoption but also a more stringent adoption criterion which tends to increase the expected delay the resulting ambiguity provides an explanation for the lack of empirical support for this hypothesis

strategic timing of adoption of new technologies under uncertainty abstract in this paper we introduce experience effects into a duopoly game of timing of adoption of new technologies which exhibit exogenous technological progress departing from the existing literature with this model we obtain continuous and downward sloping reaction functions we find that a higher level of uncertainty increases the extent of dispersion between the equilibrium timings of adoption furthermore we find that the equilibrium timings are even more dispersed when the leader takes the follower s reaction into account when firm roles are made endogenous we find that if there is an incentive to lead follow the equilibrium timings are more less dispersed finally we show that it is possible for collusive adoption to improve welfare

adoption and diffusion of an innovation of uncertain profitability the argument has frequently been made that the pattern of diffusion associated with most new innovations will typically have certain characteristics a diffusion curve for an innovation is usually defined as the proportion of its potential users who have already adopted as a function of time measured from the first adoption many empirical studies by both economists and other social scientists have shown that diffusion curves nearly always have two distinct characteristics i they are s shaped the proportion adopted is an increasing function of time which is initially convex but eventually becomes concave and ii they tend to be right hand skewed the inflection point occurs at a time corresponding to a proportion adopted which is less than one half so that the function is concave over the greatest amount of time in fact this skewing is occasionally severe enough to make the diffusion curve appear concave everywhere the focus of most empirical studies of innovation diffusion has centered on identification of either the major determinants of the speed of diffusion or the characteristics of firms which determine how long they delay adoption the seminal contributions are griliches 6 study of hybrid corn and mansfield s 121 study of 12 industrial innovations these studies and most of the similar ones following conclude that diffusion is faster for innovations with higher profitability and that large firms tend to be the earliest adopters some studies e g mansfield 121 herregat 71 have attempted to ascertain

hysteresis due to irreversible exit addressing the option to mothball abstract this paper analyses the following hitherto understudied feature in real switching options a firm has a mothballing option and an option to permanently abandon if the firm finds itself in an operating mode with a price just above the abandonment threshold it is unclear whether to exercise the abandonment option or to exercise the mothballing option if the price goes down the firm may exit but surprisingly if it goes up it may mothball we find that two different strategies could be optimal one where mothballing is not a viable option and one where mothballing does occur in the latter case a hysteresis region arises in which the firm produces at a loss while a further price decrease induces exit and a sufficient price increase results in the firm entering the mothballing stage mothballing being optimal requires sufficiently large values of the price trend and the uncertainty parameter

britain s newest import america s regulatory experience the first of these generation is a level into which competition can be injected but transmission and distribution are closer to natural monopolies the operators of the transmission grid will if separated from the other sectors have substantial monopoly power even the firmest believers in the ubiquity of contestable markets would be hard pressed to argue that potential entry effectively limits the grid s monopoly power

optimal sequential investment when capital is not readily reversible when investment opportunities arrive one at a time and are reviewed sequentially a corporation s optimal policy differs from a standard net present value rule if the corporation exercises control over an industry state variable and control is costly the first condition presupposes a degree of market power for the firm the second occurs if corporate investment decisions are imperfectly reversible to address the problem of optimal investment in this context a firm s investment decisions are modeled as a markov reward process the causes of economic irreversibility are discussed and general propositions concerning the optimal investment policy are derived these propositions are then applied to the optimization of an exploration program by an oligopolistic firm a price leader under particular demand and distributional assumptions solutions for the optimal decision rule and the value of the exploration program are obtained and their properties examined current investment may affect future opportunities by creating growth opportunities as defined by myers 16 see also spence 25 or by reducing the value of an existing opportunity set despite the known potential for these interactions capital budgeting techniques such as net present valuation scenario planning and monte carlo simulation focus exclusively on the stand alone value of an investment the capacity for modeling interactions is present in the multiperiod models of merton 16 bogue and roll 5 and others the absence of applications however is evidence that actual economic interactions between current and future opportunities are not well understood this paper develops a model of a firm facing a sequence of interdependent growth opportunities opportunities have positive net present values because the firm exercises market power in its product market current investment changes the value of future opportunities through its effect on a product market variable the model is used to examine the impact of demand industry structure and technology on optimal investment rules and on the value of aggregate growth

the diffusion of clean technologies a review with suggestions for future diffusion analysis abstract this article gives an overview of the literature on clean technology diffusion followed by suggestions for future analysis findings from diffusion analysis are presented in the form of 10 stylised facts helping the reader to see the forest for the trees the overall conclusion is that the diffusion of clean technology same as the diffusion of normal innovations is governed by endogenous mechanism epidemic learning and learning economies and by exogenous mechanisms policy is important for clean technology diffusion but other factors are important too the characteristics of the clean technology absorptive capacities of potential adopters and the age structure of capital it is often overlooked that companies have a choice they can choose between an end of pipe solution a process change adaptation and a change of process substitution this means that the diffusion and evolution of one clean technology will be at the expense of the diffusion of another clean technology something overlooked in studies on clean technology diffusion further research is needed on the influence of public policy on clean technology choice expectations about learning economies and prices adjustment costs network externalities and complementary innovations on clean technology adoption choices

price distribution in a random matching model abstract we derive a price distribution for a homogeneous good in a symmetric economy where sellers are in locations and choose prices and buyers choose locations randomly the equilibrium strategy of the sellers is a non atomic distribution

technology adoption with uncertain future costs and quality in this paper we study the impact of uncertainty about future innovations in quality and costs on consumers technology adoption decisions we model the uncertainty in the technology s quality and costs as a markov process and consider three models of the adoption decision the first model assumes that consumers do a simple net present value npv analysis that compares the npv of adopting to that of not adopting without considering the possibility of waiting the second model is a stochastic dynamic program that considers the possibility of waiting and views the adoption decision as a one time event i e the consumer will only make a single purchase the only question is when the third model allows repeat purchases so the consumer may upgrade by purchasing new versions of the technology whenever it suits her we study structural properties of these models e g the following what changes in qualities and costs will make the consumer better off what changes will encourage adoption we will see that the simple npv and single purchase model have many intuitive properties with the right notion of improvements and reasonable assumptions about the technology changes we find that improvements in the technology make the consumer better off and encourage adoption here improvements are defined using a partial order on quality and cost pairs the results are more complicated in the repeat purchase model under the same conditions on technology changes technology improvements will make the consumer better off however except for special cases of transitions these improvements may make the consumer better off and discourage adoption

technology adoption decisions under irreversibility and uncertainty an ex ante appproach empirical results demonstrate that uncertainty about costs and requirements for environmental compliance is an important determinant of dairy producers investment behavior ex ante forecasting of how uncertainty and irreversibility are likely to affect producers responsiveness to agricultural technologies has implications for the design of environmental policies simulation modeling methods are described the empirical analysis focuses on texas producers propensity to adopt free stall dairy housing free stall investments offer advantages for both productivity augmentation and pollution abatement yet uncertainty and irreversibility are obstacles to adoption implications of this ex ante paradigm for policy design and implementation are discussed

equilibrium price distribution with directed technical change abstract this paper studies a non degenerate price distribution for the homogeneous good within a model of endogenous directed technical change a probability density function is analytically derived and shown to be related to the technology and innovation parameters of the model

optimal timing of technology adoption abstract in a dynamic programming framework this paper investigates the optimal timing of technology adoption by a competitive firm when technology choice is irreversible and the firm faces a stochastic innovation process with uncertainties about both the speed of the arrival and the degree of improvement of new technologies a numerical example illustrates how the optimal timing decision is affected by changes in parameter values reflecting market conditions the firm s initial technological attributes and the characteristics of the stochastic innovation process some of these effects turn out to be in sharp contrast to common intuition contrasting the optimal decision rule derived here with the rule obtained under the net present value shows that the former implies a slower pace of adoption than implied by the latter the optimal decision rule is generalized for the case of multiple technology switches and it is shown that for all the switching decisions except the last one the optimal rule satisfies the net present value criterion

the diffusion of new technology and the market for an innovation this article shows that the diffusion of a capital embodied process innovation results from a pattern of decreasing incremental benefits and adoption costs for later adoptions strategic behavior is inessential to this finding we develop a method for comparing diffusion rates for different market structures in the capital equipment market we consider cases with market power on the seller s side of the market and on the buyers side of the market a case with no market power and the welfare optimal case we find that a joint venture adopts an innovation more slowly than other market regimes to protect existing capital investments and that the adoption rate is slower than is socially optimal a monopoly supplier on the other hand adopts at a rate faster than is socially optimal this result is usually also the case when there is no market power finally we show that the monopoly supplier accelerates adoptions faster than in the case where there is no market power but retards later adoptions market power thus makes a difference in diffusion rates and on which side of the market that power lies makes a considerable difference

on the diffusion of new technology a game theoretic approach this paper is an attempt at a rigorous albeit not exceedingly general analysis of the diffusion of new technology in particular consider an industry composed of two firms each using the current best practice technology the firms are assumed to be operating at nash equilibrium output levels generating a market price given demand and profit allocations when a cost reducing innovation is announced each firm must determine when if ever to adopt it based in part upon the discounted cost of implementing the new technology and in part upon the behavior of the rival firm if either firm adopts before the other it can expect to make substantial profits at the expense of the other firm on the other hand the discounted sum of purchase price and adjustment costs may decline with the lengthening of the adjustment period as various quasi fixed factors become more easily variable therefore although waiting costs the firm more in terms of foregone profits it may save money on the cost of purchasing the new technology thus the firm must weigh the costs and benefits of delaying adoption as well as take account of its rival s strategic behavior

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

investments of uncertain cost abstract this paper examines irreversible investment decisions when projects take time to complete and are subject to two types of cost uncertainty the first is technical uncertainty i e uncertainty over the physical difficulty of completing a project which is only resolved as the investment proceeds the second is input cost uncertainty i e uncertainty over the prices of construction inputs or over government regulations affecting construction costs which is external to the firm these two types of uncertainty have very different effects on the investment decision a simple investment rule is derived that maximizes firm value and is used to analyze the decision to start or continue building a nuclear power plant during the 1980s

the economic determinants of technology shocks in a real business cycle model abstract creative destruction due to new technologies causes both long run growth and short run business fluctuations new technologies push the economy on a higher productivity level but also imply partial obsolescence of old production units obsolescence induces an adjustment period during which growth rates gradually fall at some endogenously determined point research for the next technology starts once the new technology is discovered a technology shock occurs and the next cycle starts this is shown in a continuous time rbc model with risk averse agents where savings can be used for financing deterministic capital accumulation and stochastic r d for new technologies

bad eggs learning by doing and the choice of technology we model long run economic development through technology adoption under scientific uncertainty about environmental effects there are four possible long run equilibria in a socially planned economy high growth adopt rapidly but abandon damaging technologies once revealed ddt cfcs cautious brake the introduction of new technologies to avoid mistakes genetically modified organisms no growth halt technological progress to preserve secondary knowledge and collapse adopt rapidly without ever abandoning damaging technologies in the base parameterization a short sighted social planner chooses the cautious strategy a far sighted planner chooses the high growth strategy unless damages are irreversible in which case the cautious strategy again dominates regulatory options in the market economy are investigated pollution taxes do not affect the firm s level of precaution if they can only be applied after the adopting firm has reaped the benefits however they do encourage the abandonment of damaging technologies liability rules do affect precaution but may lead to excessive caution or even a no growth trap