Optimal Investment in Learning-Curve Technologies

41 Pages Posted: 22 Mar 2011 Last revised: 12 Apr 2013

See all articles by Marco Della Seta

Marco Della Seta

APG - Asset Management

Sebastian Gryglewicz

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)

Date Written: December 18, 2011

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.

Keywords: investment, learning by doing, investment timing, investment scale

JEL Classification: D92, G31

Suggested Citation

Della Seta, Marco and Gryglewicz, Sebastian and Kort, Peter, Optimal Investment in Learning-Curve Technologies (December 18, 2011). Journal of Economic Dynamics and Control, Vol. 36, No. 10, 2012, Available at SSRN: https://ssrn.com/abstract=1791541 or http://dx.doi.org/10.2139/ssrn.1791541

Marco Della Seta

APG - Asset Management ( email )

Gustav Mahlerplein 3
Amsterdam, 1082 MS
Netherlands

Sebastian Gryglewicz (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Peter Kort

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands
+31 13 466 2062 (Phone)
+31 13 466 3072 (Fax)

HOME PAGE: http://center.uvt.nl/staff/kort/

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2062 (Phone)
+31 13 466 3072 (Fax)

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