Heterogeneous agent modelling of technology adoption in competitive agricultural markets

Slow adoption rates of innovation in rural settings are a source of frustration for technology advocates. Adoption decisions consume two valuable but limited resources: (1) time, and (2) capacity to integrate new information. We explore the structural sociological factors using a heterogeneous agent programming model (HAM) to understand the mechanics of socio-economic linkages of diffusion in rural settings. Diffusion constraints are introduced in the form of network-threshold values that reflect the cumulative effects of experience and observation of peers’ experiences. We test a range of confounding factors and find that strong social pressures dramatically increase both innovation diffusion penetration and irregularity. Clustering is caused by strong social pressures and the aggregation of buyers near innovative firms which creates a pattern of buying explosions. As competition between innovators increases, the resulting diffusion process becomes more variable and irregular and is highly likely to result in innovation monopolies in rural areas.     

The effects of one-way compatibility on technology adoption in systems markets

This paper analyzes the effects of one-way compatibility on technology adoption in a market that is characterized by a free-entry condition on the software side. We show that hardware-backward compatibility increases a new-generation hardware firm’s profit; the effects of software-backward compatibility on the hardware firm’s profits depend on the distribution of consumer types.     

The technology adoption life cycle attractor: Understanding the dynamics of high-tech markets

Unlike more stable industries, high-tech firms must constantly be in a strategy development phase. These companies are in desperate need of assistance in strategy formulation. This paper introduces a quantitative (rather than subjective) approach to help high-tech firms to understand their position in the technology adoption life cycle using some of the principles and tools of Chaos and Complexity theories. This approach is demonstrated by using data sets of three case studies in the hard drive, microprocessor, and server high-tech industries.     

Trade liberalization,democratization, and technology adoption

A general equilibrium theory with heterogeneous skills predicts a complementarity between trade and democracy in creating demand for superior technologies. Trade liberalization or democratization alone may lead to vested interests that limit technology adoption. We use panel data on technology adoption, at a disaggregated level, for the period 1980–2000. Exploiting within-country variation over time and the heterogeneous timing of trade liberalization and democratization, we document a significant and sizable positive interaction between trade openness and democratization for technology adoption. The result that transitions to open democracies are beneficial for technological dynamics is robust to a large set of checks.     

PV adoption: the role of distribution tariffs under net metering

Journal of Regulatory Economics - The deployment of decentralized productions units (DPU) like rooftop solar panels is a major challenge for a transition towards greener energy sources. Under a net...     

Vested interests, population ageing and technology adoption

Technologies that are used differ vastly across and within countries. It is commonly observed that technologies that would improve productivity are not adopted. This paper explains the failure to adopt new technologies through costs of adoption for people of different age. We set out an overlapping generations model with majority voting that predicts a relationship between the age composition of an economy and economic growth. We also consider the effects of more intense competition on technology adoption.     

Tradeable permits,missing markets,and technology

This paper examines the effects of missing markets, heterogeneous pollutants, and the pollution technology of firms on the efficacy of transferable pollution permits. Under the assumption of perfect competition in all markets, we show that if firms can substitute among pollutants, then setting the optimal number of permits for only one pollutant will not, in general, lead to an efficient outcome. The degree of the inefficiency will depend on the information set available to the regulator and the substitutability among pollutants by firms. When establishing transferable pollution rights regulators should, therefore, consider the technology of firms. If firms discharge pollutants in the same fixed proportions, then the regulator need only set a market for one of the pollutants to ensure an efficient outcome. Where firms can substitute among pollutants, however, establishing a market for only one pollutant provides an incentive for firms to substitute to unregulated ones. This is an important policy issue as substitutability among pollutants within and across production processes may dampen the dynamic advantages of a tradeable permit policy.     

Procurement favouritism and technology adoption

It is well known that the design of cost minimizing procurement rules for the selection of a contractor among distinct technological groups requires the favouritism of inefficient firms. In this paper, I show that, if technology adoption is non-contractible, these policies will also provide optimal incentives for the inefficient firms to adopt more efficient technologies.     

Competition,strategic delegation and delay in technology adoption

This paper examines how strategic managerial delegation affects firms' timing of adoption of a new technology under different modes of product market competition. It demonstrates that strategic delegation has differential impacts on adoption dates under Cournot and Bertrand competitions. Strategic delegation with ‘own-performance’-based incentive schemes always leads to early adoption in markets with Bertrand competition compared to that under no-delegation, but not necessarily so in markets with Cournot competition. It also shows that under strategic delegation with ‘own-performance’-based incentive schemes, adoption occurs earlier (later) in markets with Cournot competition than in markets with Bertrand competition, if the degree of product differentiation is high (low). In contrast, under strategic delegation with ‘relative-performance’-based incentive schemes, adoption dates do not differ across markets with different modes of competition. It also analyses implications of firms' choice over types of managerial incentive schemes on the speed of diffusion of new technology.     

Growth,expectations and tariffs

We present a growth model of international trade in which expectations about profitability and growth influence innovation and investment. Adaptive learning dynamics determine transition paths for countries with differing structural parameters. Countries limiting trade by tariffs on imports of capital goods can experience gains in growth and perceived utility for a finite time, whereas the rest of the world is adversely affected. Asymmetric gains persist longer when structural advantages of the country applying tariffs are larger. Substantial differences in levels of innovation, output and utility can appear within our asymmetric country setting.     

Insurance,credit, and technology adoption: Field experimental evidencefrom Malawi

Does production risk suppress the demand for credit? We implemented a randomized field experiment to ask whether provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop technology. The study sample was composed of roughly 800 maize and groundnut farmers in Malawi, where by far the dominant source of production risk is the level of rainfall. We randomly selected half of the farmers to be offered credit to purchase high-yielding hybrid maize and groundnut seeds for planting in the November 2006 crop season. The other half of farmers were offered a similar credit package, but were also required to purchase (at actuarially fair rates) a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall. Surprisingly, take-up was lower by 13 percentage points among farmers offered insurance with the loan. Take-up was 33.0% for farmers who were offered the uninsured loan. There is suggestive evidence that reduced take-up of the insured loan was due to farmers already having implicit insurance from the limited liability clause in the loan contract: insured loan take-up was positively correlated with farmer education, income, and wealth, which may proxy for the individual's default costs. By contrast, take-up of the uninsured loan was uncorrelated with these farmer characteristics.     

Technological expectations and adoption of improved technology

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.     

A model of technology adoption and growth

Summary We construct a model of economic growth in which firms adopt more advanced technologies. In order to advance its technology, a firm must make an investment. The size of this investment depends on the size of the technology adoption barriers in the firm's country Assuming a Markov chain for these barriers, we examine the amount of variation and persistence in the chain for which the model matches the observed output disparity across countries and the mobility of nations. Our calibration suggests a range for the size of these barriers of a factor five, and the presence of a barrier trap.The author is grateful to V. V. Chari, Larry Christiano, Javier Díaz-Giménez, David Johnson, Edward C. Prescott, Richard Rogerson, James Schmitz, and Javier Vallés for their comments. An earlier version of this paper circulated under the title of Economic Institutions and External Factors: Implications for the Replacement of Inferior Technologies and Growth.     

Domestic entry, optimum-welfare and maximum-revenue tariffs

In this paper, we examine the ranking of the maximum-revenue tariff and the optimum-welfare tariff under a linear Cournot oligopoly model without and with free entry of domestic firms. We demonstrate that in a regulated entry oligopoly with asymmetric costs, when the marginal cost of the domestic firms exceeds a critical value, the maximum-revenue tariff is higher than the optimum-welfare tariff. We then show that under free entry of domestic firms with asymmetric costs, when the fixed cost gets larger and the domestic firms become fewer, the difference between the optimum-welfare tariff and the maximum-revenue tariff becomes larger.     

Technology adoption in markets with network effects: Theory and experimental evidence

We examine a technology-adoption game with network effects in which coordination on either technology A or technology B constitutes a Nash equilibrium. Coordination on technology B is assumed to be payoff dominant. We define a technology’s critical mass as the minimal share of users, which is necessary to make the choice of this technology the best response for any remaining user. We show that the technology with the lower critical mass implies risk dominance and selection by the maximin criterion. We present experimental evidence that both payoff dominance and risk dominance explain participants’ choices in the technology-adoption game. The relative riskiness of a technology can be proxied using either technologies’ critical masses or stand-alone values absent any network effects.     

Consumption risk, technology adoption and poverty traps: Evidence from Ethiopia

Much has been written on the determinants of technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented: the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data from Ethiopia. Historical rainfall distributions are used to identify consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just ex ante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertilizer. The lack of insurance or alternative means of keeping consumption smooth leaves some trapped in low return, lower risk agriculture, one of the mechanisms through which poverty perpetuates itself in agrarian settings.     

Social dilemmas,time preferences and technology adoption in a commons problem

Agents interacting on a body of water choose between technologies to catch fish. One is harmless to the resource, as it allows full recovery; the other yields high immediate catches, but low(er) future catches. Strategic interaction in one ‘objective’ resource game may induce several ‘subjective’ games in the class of social dilemmas. Which unique ‘subjective’ game is actually played depends crucially on how the agents discount their future payoffs. We examine equilibrium behavior and its consequences on sustainability of the common-pool resource system under exponential and hyperbolic discounting. A sufficient degree of patience on behalf of the agents may lead to equilibrium behavior averting exhaustion of the resource, though full restraint (both agents choosing the ecologically or environmentally sound technology) is not necessarily achieved. Furthermore, if the degree of patience between agents is sufficiently dissimilar, the more patient is exploited by the less patient one in equilibrium. We demonstrate the generalizability of our approach developed throughout the paper. We provide recommendations to reduce the enormous complexity surrounding the general cases.     

Strategic tariffs, tariff jumping, and heterogeneous firms

The majority of research to date investigating strategic tariffs in the presence of multinationals finds a knife-edge result where, in equilibrium, all foreign firms are either multinationals or exporters. Utilizing a model of heterogeneous firms, we find equilibria in which both pure exporters and multinationals coexist. We utilize this model to study the case of endogenously chosen tariffs. As is standard, Nash equilibrium tariffs are higher than the socially optimal tariffs. Unlike existing models with homogeneous firms, we find that non-cooperative tariffs promote the existence of low-productivity firms relative to the socially optimal tariffs. This highlights a new source of inefficiency from tariff competition not found in models of homogeneous firms. In addition, we find that in many cases the Nash equilibrium tariff when FDI is a potential firm structure is lower than when it is not. As a result, FDI improves welfare by mitigating tariff competition.     

Loan processing costs,information asymmetries and the speed of technology adoption

This paper presents a simple model in which credit-constrained firms might delay the adoption of new and more productive technologies because of the external financing costs involved. Applying for a loan can be a very costly process by itself. Where there is a high degree of credit rationing, these costs might even deter entrepreneurs from applying for a loan altogether. We argue that the efficiency of the banking system, by affecting such costs, can influence the profitability of new technologies and entrepreneur's investment decisions, which, in turn, influence new technology implementation, capital accumulation and growth.     

Individualism and the adoption of clean energy technology

Why do 20% of Swedes report having adopted a clean energy system while the corresponding share of Spaniards equals 0.4%? Using data for about 25,000 individuals across 33 countries, this study tests which cultural trait, individualism or collectivism, is associated with greater levels of clean technology adoption. Our fractional probit estimates suggest that individualistic individuals are more inclined to adopt clean energy systems for home and transport purposes. In particular, the adoption probability rises by an estimated 2% if a person exhibits individualistic values. This finding is not driven by country-specific tax or subsidy policies or market-specific determinants and is robust to controlling for individual and household characteristics, attitudes, social and personal norms and other significant dimensions of cultural differences. The results, therefore, facilitate an understanding of how the decision to adopt clean energy technologies can be driven by cultural factors.