Herd Behaviour in Adoption of Network Technologies |
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Authors: | Cecilia Vergari |
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Institution: | (1) Université Catholique de Louvain - CORE, Voie du Roman Pays, 34, 1348 Louvain-La-Neuve, Belgium |
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Abstract: | In technology adoption, herd behaviour can lead to a suboptimal outcome as shown, among others, by Choi (1997). However, empirics
find little support for the idea that a less efficient technology can conquer the market and lock out a more efficient one.
Accordingly, we improve and generalize Choi's results, by introducing an additional source of uncertainty: the economic environment.
We investigate how the economic environment can affect herding and consequently the efficiency of the technology choice. The
result is a smaller adoption bias. In the limit, firms may optimally experiment with the new technology that turns out to
be social welfare improving. |
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Keywords: | herding externalities public information technology adoption |
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