Choosing between traditional and innovative technologies: the case of scientific uncertainty

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We study the choice between a traditional technology characterized by known risks and an innovative technology (a geological storages for nuclear wastes, a genetically modified organism or a new treatment in medical science) subject to scientific uncertainty. We assume that the two technologies differ in first period implementation costs, second period risk, and degree of irreversibility, and we study the effect of foreseen scientific progress on the present choice between the two. If the first-period choice is restricted to be 'all or nothing', scientific progress promotes the traditional technology; with constant absolute risk aversion, scientific progress increases the optimal level of the technology with the higher implementation cost.

Date: 2001-12-01
New Economics Papers: this item is included in nep-ino and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as “Uncertainty and the cost of reversal”, in The Geneva Risk and Insurance Review, 30 (2005), pages 119-128

Downloads: (external link)
http://www.csef.it/WP/wp74.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:74

Access Statistics for this paper

More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante ().