Technology Adoption Under Costly Information Processing

Abstract

A new explanation for imperfect technology adoption is proposed. In the model, agents allocate scarce attention rationally between actions and decide whether and how to adopt a technology. Introducing constraints to information processing gives rise to attentional barriers to technology adoption, which affect optimal adoption behavior. The model can explain why individuals (i) fail to adopt profitable technologies, (ii) fail to make the best use of adopted technology, (iii) treat complementary technologies as substitutes, and (iv) change their adoption decision back and forth over time. The model complements existing learning models and is consistent with empirical evidence.

Household and plot-level survey data on adoption, outcomes, and perceptions of early sown wheat and zero tillage in Northwest India

“…Within the literature on agricultural technology adoption among smallholder farmers, a wide range of factors are considered as potential barriers to the adoption of modern farming technologies, including market imperfections related to finance and insurance 9 , 10 , limited access to complementary inputs (such as groundwater and affordable energy for irrigation) 11 – 14 , frictions in information and learning 15 – 17 , peer effects in social networks 18 – 21 , as well as other behavioural biases 22 . By collecting rich information both on actual adoption rates of ESW and respective agricultural outcomes, and on farmers’ knowledge and perceptions of ESW and zero tillage technologies (irrespective of whether they had personally used these technologies), our dataset may be useful for future research that investigates different channels and mechanism affecting ESW adoption, and ultimately to inform policy making aimed at improving adoption and usage decisions of these agricultural innovations.…”

The Social Planning Problem with Costly Information Processing: Towards Understanding Production Decisions in Centralized Economies

“…Notice also that condition (5) corresponds to a standard choice problem under uncertainty. In the rational inattention literature, this is sometimes referred to as the second-stage problem, while choosing the allocation of attention is called the first-stage problem (Matȇjka and McKay 2015;Naeher 2022). 17.…”