EEP 143 Lecture 19 - EEP 143 Lecture 19 Diffusion and Adoption Outline Introduction Social and economic determinants S-Curve Example Real-life

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EEP 143 Lecture 19 Diffusion and Adoption Outline: Introduction Social and economic determinants S-Curve Example Real-life examples Economic determinants of diffusion Case Study I: The Dynamo More economics - option value Case Study II: Hybrid Corn Case Study III: Green Revolution
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Introduction “Diffusion can be perceived as the spread of an innovative product throughout the economy” Examples of innovative products: tractor, computers, cell phones Adoption is diffusion from the users’ point of view: decision whether to buy the innovation or not The diffusion process throughout innovations has shown fairly consistent behavior
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“In the history of diffusion of many innovations, one cannot help being struck by two characteristics of the diffusion process: its apparent overall slowness on the one hand, and the wide variations in the rates of acceptance of different inventions, on the other.” (Rosenberg, 1976, p. 191).
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Sociology: Attributes influencing adoption 1. Relative advantage of innovation 2. Compatibility with industrial and/or social norms 3. Complexity 4. Trialability – especially at affordable scale 5. Observability – ease of evaluation See Rogers E. M. The Diffusion of Innovations 1995
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Sociology: Attributes influencing speed of adoption 1. Nature of decision: collective, individual, or top down 2. Communications channel: mass media or personal 3. Social system: norms, interconnectedness 4. Promotional efforts of change agents: advertisers, extension agents, pharma detailers See Rogers E. M. The Diffusion of Innovations 1995
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Economic Determinants of Diffusion The faster agents adopt a specific innovation, the faster is the diffusion of that innovation Since adoption of an innovation requires investment, the rate of diffusion will be influenced by : Benefits Costs Uncertainty Institutions and Environment Remember determinants of the NPV
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Economic Determinants of Diffusion Benefits in turn depend on: Competitiveness of substitute technologies Tractors vs. Horses Networks and network standards Experience, observation, trial and learning Costs depend on: Price of the new technology Complementary investments If a firm wants to buy computers, then she also has to try to train her personnel
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Economic Determinants of Diffusion Uncertainty can be found on many aspects:
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This note was uploaded on 08/01/2008 for the course ECON 143 taught by Professor Wright during the Fall '07 term at University of California, Berkeley.

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EEP 143 Lecture 19 - EEP 143 Lecture 19 Diffusion and Adoption Outline Introduction Social and economic determinants S-Curve Example Real-life

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