This work focusses on the externalities in technology use. Externalities arise from learning among producers, learning among users, and network externalities of various kinds. When these features of a technology are strongly present, they imply that the benefit to using a technology increases with the number of other agents using that same technology. Potential bandwagons and technological lock-in exist.
In this paper we model a repeated choice problem in which agents are choosing technologies to perform tasks. Agents impose externalities on each other through their choices of technology. There are both global and local, positive and negative, externalities associated with adopting a particular technology. We analyze the spatial distribution of technology use in equilibrium. The nature of the pattern of technology use depends critically on the degree to which agents are heterogeneous in the uses to which they put the technology. There is a critical degree of heterogeneity above which there is no spatial pattern, but below which there is almost complete local standardization.
This paper develops a technique for analyzing economies with a large but finite number of interacting agents. Heterogeneous agents are faced with a repeated choice problem, and are subject to externalities from the actions of other agents, but the nature of these externalities is dependent on the location of the agents. The concern is with the spatial distribution of economic activity in such an economy. We develop a technique that allows us to relate the probability of observing a particular state of the economy with the costs associated with that state. We use this technique to analyse a technology choice problem in which the concern is with the degree and spatial nature of technical standardization and the conditions under which variety is preserved.
Theoretical literature on the economics of technology has emphasized the effects on technological trajectories of positive feedbacks. In a competition among technologies that all perform a similar function, the presence of increasing returns to adoption can force all but one technology from the market. Furthermore, the victor need not be the superior technology. This paper provides an empirical study of one technological competition which illuminates this theoretical work. It uses theoretical results to explain why chemical control of agricultural pests remains the dominant technology in spite of many claims that it is inferior to its main competitor, integrated pest management.
Philip Gunby, Department of Economics, University of Canterbury, Christchurch, New Zealand. firstname.lastname@example.org