A percolation model of eco-innovation diffusion: The relationship between diffusion, learning economies and subsidies

Cantono S & Silverberg G (2009). A percolation model of eco-innovation diffusion: The relationship between diffusion, learning economies and subsidies. Technological Forecasting and Social Change 76 (4): 487-496. DOI:10.1016/j.techfore.2008.04.010.

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Abstract

An obstacle to the widespread adoption of environmentally friendly energy technologies such as stationary and mobile fuel cells is their high up-front costs. While much lower prices seem to be attainable in the future due to learning curve cost reductions that increase rapidly with the scale of diffusion of the technology, there is a chicken and egg problem, even when some consumers may be willing to pay more for green technologies. Drawing on recent percolation models of diffusion, we develop a network model of new technology diffusion that combines contagion among consumers with heterogeneity of agent characteristics. Agents adopt when the price falls below their random reservation price drawn from a lognormal distribution, but only when one of their neighbors has already adopted. Combining with a learning curve for the price as a function of the cumulative number of adopters, this may lead to delayed adoption for a certain range of initial conditions. Using agent-based simulations we explore when a limited subsidy policy can trigger diffusion that would otherwise not happen. The introduction of a subsidy policy seems to be highly effective for a given high initial price level only for learning economies in a certain range. Outside this range, the diffusion of a new technology either never takes off despite the subsidies, or the subsidies are unnecessary. Perhaps not coincidentally, this range seems to correspond to the values observed for many successful innovations.

Item Type: Article
Uncontrolled Keywords: Environmental technologies; Heterogeneous agents; Innovation diffusion; Learning economies; Networks; Percolation; Technology subsidies
Research Programs: Energy (ENE)
Transitions to New Technologies (TNT)
Bibliographic Reference: Technological Forecasting and Social Change; 76(4):487-496 (May 2009)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:42
Last Modified: 25 Feb 2016 09:09
URI: http://pure.iiasa.ac.at/8859

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