Optimal Investment in Learning-Curve Technologies
Marco Della Seta
HEC-University of Lausanne
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)
Peter M. Kort
Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER)
December 18, 2011
Journal of Economic Dynamics and Control, Vol. 36, No. 10, 2012
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.
Number of Pages in PDF File: 41
Keywords: investment, learning by doing, investment timing, investment scale
JEL Classification: D92, G31Accepted Paper Series
Date posted: March 22, 2011 ; Last revised: April 12, 2013
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