Supply Chain Design and Adoption of Indivisible Technology

In this paper, we develop a framework to analyze adoption of indivisible technologies by relatively small farms using a threshold diffusion model. It shows that different supply chains may emerge to enable the adoption of indivisible technologies. Independent technology dealers may buy the indivisible equipment and rent it to farmers, when the gain from adoption is not affected by scale or ownership of the technology. Also, larger farmers may buy the technology equipment and rent it (renting the machine per se or providing a set of services that includes use of the machinery for the farmer buying the service) to smaller farmers, especially when there are gains from scale or ownership. The paper derives equilibrium prices and quantities in the output, equipment, and technology rental market. These equilibrium prices and quantities depend on the heterogeneity of farmers and the features of the technology. Introduction of the new indivisible technology will benefit larger adopting farmers and consumers but may hurt non-adopters. We illustrate our conceptual findings with empirical examples.

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Conference Paper/ Presentation
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JEL Codes:
Q12; Q18

 Record created 2017-04-01, last modified 2018-01-23

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