| Affiliation: | (1) Research Institute of Social Policy, University of Cologne, Klosterstraße 79b, D-50931 Cologne, Germany;(2) School of Administration, University of Ghana, P.O. Box LG 78, Legon, Accra, Ghana |
| Abstract: | The paper examines the adoption of a new technology in oligopoly, where there is ex ante uncertainty about variable costs of the new technology. Each firm can either adopt the new process by bearing some up-front investment or may continue to use the old one, after which firms play a Cournot market game. If in equilibrium both technologies are employed, more uncertainty about the new technology increases (decreases) the number of innovating firms and decreases (increases) the product price if the up-front investment is large (small). Our model applies readily to vertical integration if integrated firms neither buy nor sell the intermediate good on the market. However, if buying and selling is allowed, the number of integrated firms is independent of input price uncertainty. |
