Technology adoption under price uncertainty

Abstract

bias and intrafirm rate-o'r diffusio~ of technical chanie. The results indicate that a reduction in the variance of o_utput prices will increase the rate of _adoption and intrafirm speed of diffusion of yield-increasing technologies. The opposite is true for cost-reducing technologies. '' Technology Adoption Under Price Uncertaint_y There is a large body of literature on the effects of government price stabilization programs on producer and consumer welfare and on economic indicators in the agricultural sector. To the authors' knowledge, nobody has yet examined how these programs affect the type of technologies that are adopted or the rate of diffusion of new technologies. That there should be some relationship between price stability and technological adoption is clear. The adoption of new technologies involves risk, and price stabilization programs are designed to remove risk. Also, some technologies are more risky than others. It seems reasonable to hypothesize that producers will rank new technologies differently under different price regimes. ' ~.. .. 13 Notes : 1 This restrictive assumption is justified on two fronts:. First, it is possible to derive the following results in the situation where quantity is variable. The methodology is, however, more complex and would greatly extend the length of this paper. These results are available from the authors on request. Second, governments that alter the variance of output prices might be justified in assuming that the variance of output will remain unchanged .. Consequently, this assumption is in keeping with the policy focus of this paper.

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