Optimal Investment in Learning-Curve Technologies
41 Pages Posted: 22 Mar 2011 Last revised: 12 Apr 2013
Date Written: December 18, 2011
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: Suggested Citation