series: OCFEB Research Memoranda; RM 0009
A vintage model of technology diffusion: The effects of returns to disversity and learning by using
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The diffusion of new technologies is a lengthy process and many firms continue to invest in relatively old technologies. This paper develops a vintage model of technology adoption and diffusion that aims at explaining these two phenomena. Our explanation for these phenomena emphasises the relevance of complementarity between different vintages (or, alternatively, returns to diversity) and learning-by- using. The model is characterised by simultaneous investments in vintages of different quality and endogenously determined scrapping of old technologies. We show that the stronger the complementarity between different vintages and the stronger the learning-by-using, the longer it takes before firms scrap (seemingly) inferior technologies.
- O33 : Technological Change: Choices and Consequences; Diffusion Processes
- Q43 : Energy and the Macroeconomy
- E22 : Capital; Investment (including Inventories); Capacity