| Technological advancement is an inherently dynamic process. Yet, existing technology adoption models in both the theoretical and empirical economics literatures focus on firms' reaction to a single new technology. This research aims to extend both strands of the literature by examining how the prospect of future technological advancement alters firms' incentives to adopt new technologies in the presence of spillover effects. First, I solve and estimate an innovative model where competing firms make repeated decisions regarding whether or not to upgrade their technology. Each firm's choice directly affects the incentives of its competitors as the technological frontier progresses. Firms face uncertainty regarding the release of future advancements and optimize accordingly. Not surprisingly, adding technological advancements to the standard model changes firms' equilibrium adoption dates of the first technology. Conditional on the parameterization of the model there exists a unique equilibrium outcome of the dynamic upgrading game. However, different parameterizations can generate a variety of firm behaviors. Using a novel dataset I estimate the model in the context of hospitals' replacement of MRI equipment. Results suggest that there are a complicated collection of effects that influence a hospital's decision to upgrade its MRI technology. Second, in joint work with Dr. Tim Moore, we extend the theoretical literature by introducing a second cost-reducing technology to the seminal duopoly technology adoption timing game. Through a variety of simulations we examine how the rate of technological diffusion and total market welfare are affected by the second advancement. We show that the presence of an additional advancement generally seems to decrease the overall inefficiency in a duopoly market. |
