In technology adoption, herd behavior 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.
Vergari, C. (2005). Herd Behavior in Adoption of Network Technologies, 86 (2005), 161-182.
Herd Behavior in Adoption of Network Technologies
VERGARI, CECILIA
2005-01-01
Abstract
In technology adoption, herd behavior 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.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
