Optimal investment in learning-curve technologies

M. Della Seta, S. Gryglewicz, P.M. Kort

Research output: Contribution to journalArticleScientificpeer-review

15 Citations (Scopus)

Abstract

We study optimal investment in technologies characterized by the learning curve. There are two investment patterns depending on the shape of the learning curve. If the learning process is slow, firms invest relatively late and on a larger scale. If the curve is steep, firms invest earlier and on a smaller scale. We further demonstrate that learning investment differs greatly from investment in technologies without learning effects. Learning investments generate substantial initial losses and are very sensitive to downside risk. We show that the most susceptible to losses and risk are technologies with intermediate speed of learning.
Original languageEnglish
Pages (from-to)1462-1476
JournalJournal of Economic Dynamics and Control
Volume36
Issue number10
DOIs
Publication statusPublished - 2012

Keywords

  • learning-curve technology
  • investment timing
  • investment size
  • real options

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