Files
Abstract
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.