Optimal adoption of complementary technologies

Boyan Jovanovic; Dmitriy Stolyarov

doi:10.1257/aer.90.1.15

Optimal adoption of complementary technologies

Boyan Jovanovic, Dmitriy Stolyarov

Research output: Contribution to journal › Article › peer-review

Abstract

When a production process requires two extremely complementary inputs, conventional wisdom holds that a firm would always upgrade them simultaneously. We show, however, that if upgrading each input involves a fixed cost, the firm may upgrade them at different dates, "asynchronously." This insight helps us understand why productivity rises with the age of a plant, why investment in structures is more spiked than equipment investment, and why plants have spare capacity. The bigger point of the paper is that complementarity does not necessarily imply comovement -not even for a single decision maker.

Original language	English (US)
Pages (from-to)	15-29
Number of pages	15
Journal	American Economic Review
Volume	90
Issue number	1
DOIs	https://doi.org/10.1257/aer.90.1.15
State	Published - Mar 2000

ASJC Scopus subject areas

Economics and Econometrics

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10.1257/aer.90.1.15

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author = "Boyan Jovanovic and Dmitriy Stolyarov",

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Optimal adoption of complementary technologies

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ASJC Scopus subject areas

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