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SEMINARIO CEA/MIPP/ Ricardo Fonseca (Javeriana, Colombia)

Hora: 12:30 PM Santiago.

Dónde: Sala Consejo (401) – Beauchef 851, piso 4 / Departamento de Ingeniería Industrial.

Tema:  “Staggered Rollout for Innovation Adoption”.

Speaker: Ricardo Fonseca (Javeriana, Colombia)

Abstract:

I consider a mechanism design approach to innovation adoption and show how it is optimal for the principal to induce artificial scarcity to speed it up. Take-up of a new product generates information about its value for others, so agents want to free-ride before irreversibly adopting it themselves. This causes a time-delay externality that a principal seeking to achieve an adoption target as quickly as possible (for example, a government trying to reach herd immunity through vaccination while agents are uncertain of their personal vaccination benefits, not internalizing the positive externality of reaching the adoption target) seeks to avoid. Scarcity speeds up learning because it limits free-riding. I show that the possibility of imposing supply restrictions is always beneficial compared to free supply. I also show that optimal supply plans are simple in that there is a batched supply release with fewer batches than agents’ value types. I fully characterize such optimal plans for settings with up to three types and show that (non-optimal) supply plans may be Pareto improving.