Learning By Doing,Technology Choice,and Export Promotion*

This paper shows that when there is a high degree of learning by doing for a new superior technology (versus no learning by doing for the old inferior technology), there might be multiple equilibria in technology choice and export-market expansion. the inferior technology might be chosen when there is no coordination between the firms and the government. With coordination, Pareto improvement might be possible, with each firm choosing the superior technology and the government undertaking to expand the international market. This idea is demonstrated by a two-period (a learning period and a mature period) model with two firms that have symmetric demand and cost functions.