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Innovation adoption by forward-looking social learners

Author

Listed:
  • Frick, Mira

    (Department of Economics, Princeton University)

  • Ishii, Yuhta

    (Department of Economics, Pennsylvania State University)

Abstract

We build a model studying the effect of an economy's potential for social learning on the adoption of innovations of uncertain quality. Assuming consumers are forward-looking (i.e.,\ recognize the value of waiting for information), we analyze how qualitative and quantitative features of the learning environment affect equilibrium adoption dynamics, welfare, and the speed of learning. Based on this, we show how differences in the learning environment translate into observable differences in adoption dynamics, suggesting a purely informational channel for two commonly documented adoption patterns---S-shaped and concave curves. We also identify environments that are subject to a saturation effect: Increased opportunities for social learning can slow down adoption and learning and do not increase consumer welfare, possibly even being harmful.

Suggested Citation

  • Frick, Mira & Ishii, Yuhta, 2024. "Innovation adoption by forward-looking social learners," Theoretical Economics, Econometric Society, vol. 19(4), November.
    • Handle: RePEc:the:publsh:4455
    as

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    References listed on IDEAS

    as
    1. Fudenberg, Drew & Tirole, Jean, 1986. "A Theory of Exit in Duopoly," Econometrica, Econometric Society, vol. 54(4), pages 943-960, July.
    2. Jensen, Richard, 1982. "Adoption and diffusion of an innovation of uncertain profitability," Journal of Economic Theory, Elsevier, vol. 27(1), pages 182-193, June.
    3. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Innovation adoption; social learning; informational free-riding; strategic experimentation; exponential bandits;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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