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Adjustment Costs, Learning-by-Doing, and Technology Adoption Under Uncertainty

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dc.creator Pavlova, Anna
dc.date 2002-08-12T17:03:04Z
dc.date 2002-08-12T17:03:04Z
dc.date 2002-08-12T17:03:14Z
dc.date.accessioned 2013-05-31T18:35:05Z
dc.date.available 2013-05-31T18:35:05Z
dc.date.issued 2013-06-01
dc.identifier http://hdl.handle.net/1721.1/1574
dc.identifier.uri http://koha.mediu.edu.my:8181/jspui/handle/1721
dc.description We consider a variety of vintage capital models of a firm?s choice of technology under uncertainty in the presence of adjustment costs and technology-specific learning. Similar models have been studied in a deterministic setting. Part of our objective is to examine the robustness of the implications of the certainty models to uncertainty. We find that the answer crucially depends on the specification of the costs of adoption of a new vintage of technology. In particular, if the cost comes only in terms of accumulated technology-specific expertise (cf. Parente (1994)), we demonstrate that the implications are robust for a variety of specifications of the firm?s production function. However, once we develop a model in which each adoption requires a capital expenditure, predictions become increasingly di?erent as uncertainty increases. The model implies that in booms, the firm accelerates adoptions of new technologies, delaying them in recessions. Adverse e?ects of a recession on the investment decisions are alleviated in part by the firm?s expertise (or human capital). Compared to the deterministic benchmark, the firm increases the pace of adoptions, making a smaller technological advance each time it upgrades its technology. Overall, uncertainty negatively impacts growth and the firm value.
dc.format 318113 bytes
dc.format application/pdf
dc.language en_US
dc.relation MIT Sloan School of Management Working Paper;4369-01
dc.subject Optimal scrapping
dc.subject Learning-by-doing
dc.subject Vintage capital
dc.subject Technological change
dc.title Adjustment Costs, Learning-by-Doing, and Technology Adoption Under Uncertainty

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