Innovation Adoption by Forward-Looking Social Learners

58 Pages Posted: 18 Feb 2015 Last revised: 26 Sep 2023

See all articles by Mira Frick

Mira Frick

Yale University - Cowles Foundation

Yuhta Ishii

Pennsylvania State University

Date Written: February 16, 2015

Abstract

We build a model studying the effect of an economy's potential for social learning on the adoption of innovations of uncertain quality. Assuming consumers are forward-looking (i.e.,\ recognize the value of waiting for information), we analyze how qualitative and quantitative features of the learning environment affect equilibrium adoption dynamics, welfare, and the speed of learning. Based on this, we show how differences in the learning environment translate into observable differences in adoption dynamics, suggesting a purely informational channel for two commonly documented adoption patterns---S-shaped and concave curves. We also identify environments that are subject to a \saturation effect: Increased opportunities for social learning can slow down adoption and learning and do not increase consumer welfare, possibly even being harmful.

Keywords: Innovation adoption, social learning, informational free-riding, strategic experimentation, exponential bandits

JEL Classification: D81, D83, O33

Suggested Citation

Frick, Mira and Ishii, Yuhta, Innovation Adoption by Forward-Looking Social Learners (February 16, 2015). Cowles Foundation Discussion Paper No. 1988, Available at SSRN: https://ssrn.com/abstract=2565769 or http://dx.doi.org/10.2139/ssrn.2565769

Mira Frick

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Yuhta Ishii (Contact Author)

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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