Technological expectations and adoption of improved technology

Optimal regime switching under risk aversion and uncertainty

“…Examples of early work in the area of investment under technological uncertainty include Balcer & Lippman (1984), who model technological uncertainty via a discrete semi-Markov process and find that a higher rate of innovation tends to delay technology adoption. Grenadier & Weiss (1997) consider a firm that, in the light of technological uncertainty, may either adopt each technology that becomes available (compulsive) or postpone investment until an innovation takes place and then either adopt an older (laggard) or a newer technology (leapfrog).…”

“…Thus, the decisionmaker must select the time τ (3) 1 that solves problem (4), where E [·|F t ] is the expectation operator that is conditional on the information at time t and S is the set of stopping times of the filtration generated…”

New Product Innovation with Multiple Features and Technology Constraints

“…Adner and Levinthal (2001) explicitly consider the interaction between technology change and demand; our model differs in that we consider multiple features and include an explicit cost structure. In the literature on technology adoption, Balcer and Lippman (1984) is particularly germane to our work because they too have a model with multiple sequential innovations. However, our model differs significantly from theirs in that (i) our exogenous technology and R&D goals are vector-valued to reflect multiple product features, (ii) net revenue in our model is a function of more than the level of exogenous technology, and (iii) our model allows for (vector-valued) incremental innovation as well as frontier innovation.…”

Irreversible Choice of Uncertain Technologies with Network Externalities

“…In the irreversible investment literature, McDonald and Siegel (1986) study the optimal timing of investment in an irreversible project where the value of the project follows continuous time stochastic processes in the absence of network externalities -see also Baldwin (1982) and Pindyck (1988). Balcer and Lippman (1984) also consider a situation where a firm must decide whether to adopt the best currently available technology or to postpone adoption in anticipation of better technology in the near future. Their focus is not on the externalities exerted upon one generation of consumers by another generation.…”