Toward an Understanding of Technology Adoption: Risk, Learning, and Neighborhood Effects

Abstract

Agricultural pollution frequently is addressed through economic incentives for adopting alternative management practices. Designing efficient incentives requires understanding technology adoption behavior. This study estimates an adoption model incorporating risk preferences, endogenous learning, and peer-group influence to examine the importance of these behavioral drivers. Results suggest risk preferences and learning are key determinants, and that peer-group influence is less relevant. Thus the impact of a policy may depend more on the ability of the incentive to compensate producers for anticipated losses, and the extent to which information is shared, rather than on the “bandwagon” effect produced by early adopters or targeted incentives. (JEL Q21)