Unused innnovations

Because of informational spillovers, firms in a market may never adopt a new technique whose returns are uncertain even if its von Neumann-Morgenstern expected utility is strictly positive. The interaction between firms is modelled as a waiting game. It is shown that there exists a unique stationary equilibrium in completely mixed strategies where the probability of never adopting is positive. The individual equilibrium probability of adoption in each decreases as the number of firms increases and as the discount factor decreases. © 1992.