Supply Chain Design and Adoption of Indivisible Technology

13 Pages Posted: 16 Apr 2020

See all articles by Liang Lu

Liang Lu

University of California, Berkeley

Thomas Reardon

Michigan State University

David Zilberman

University of California, Berkeley - Department of Agricultural & Resource Economics

Date Written: October 2016

Abstract

We develop a framework for analyzing small farms' adoption of indivisible technologies by using a threshold diffusion model. The article shows that different supply chains may emerge to enable the adoption of these technologies. When the gain from adoption is not affected by scale or ownership of the technology, independent technology dealers or larger farmers may buy the indivisible equipment that embodies the technology and rent it to farmers, or enable farmers to outsource the machine's services by supplying custom services. The article derives equilibrium prices and quantities in the output and equipment rental or outsourcing markets. The prices and quantities are a function of the heterogeneity of farmers and the features of the technology. Introducing the new indivisible technology will benefit larger adopting farmers and consumers but may hurt non‐adopters. We illustrate our conceptual findings.

Keywords: Agricultural services, farm mechanization, machine rental and machine services outsourcing, supply chain, technology adoption, threshold model

Suggested Citation

Lu, Liang and Reardon, Thomas and Zilberman, David, Supply Chain Design and Adoption of Indivisible Technology (October 2016). American Journal of Agricultural Economics, Vol. 98, Issue 5, pp. 1419-1431, 2016, Available at SSRN: https://ssrn.com/abstract=3577023 or http://dx.doi.org/10.1093/ajae/aaw076

Liang Lu (Contact Author)

University of California, Berkeley

310 Barrows Hall
Berkeley, CA 94720
United States

Thomas Reardon

Michigan State University ( email )

David Zilberman

University of California, Berkeley - Department of Agricultural & Resource Economics ( email )

Berkeley, CA 94720
United States

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