A Further Analysis on Strategic Timing of Adoption of New Technologies under Uncertainty

In this paper we analyze technology adoption in the context of a duopoly, where the time between adoption and successful implementation is uncertain. This framework is taken from Stenbacka and Tombak, and as such it adds uncertainty to the much cited work of Fudenberg and Tirole. The analysis is mainly focussed on the case where the firm roles are endogenous. We find that under a certain scenario dispersed adoption timings turn into joint-adoption when firm roles become endogenous. Further, it is shown that for reasonable parameter values it can happen that the profit stream belonging to the preemption equilibrium is that low that both firms are even better off if they both decide to stick to producing with their old technology forever. Another interesting result is that if we have joint adoption in the feedback case with exogenous firm roles, the most reasonable outcome results in delayment of joint-adoption in case that firm roles become endogenous.