Strategic timing of adoption of new technologies under uncertainty

In this paper we introduce experience effects into a duopoly game of timing of adoption of new technologies which exhibit exogenous technological progress. Departing from the existing literature, with this model we obtain continuous and downward-sloping reaction functions. We find that a higher level of uncertainty increases the extent of dispersion between the equilibrium timings of adoption. Furthermore, we find that the equilibrium timings are even more dispersed when the leader takes the follower's reaction into account. When firm roles are made endogenous we find that if there is an incentive to lead (follow) the equilibrium timings are more (less) dispersed. Finally, we show that it is possible for collusive adoption to improve welfare.