Investment in new technology: Modelling the decision process

This paper presents a model designed to throw light on the economic mechanisms determining the decision to acquire a new technology to replace an existing one. The investment decision is governed by a cost-benefit analysis, which is influenced by the factors analysed in the model described. These factors are the lapse of time between the acquisition of the technology currently in use and the moment at which the new technology becomes available; the useful life of the new technology; the speed of the innovation process; interest rates; the acquisition cost of the new technology; and learning costs. A static comparative analysis is performed on the basis of these factors with the aim of recommending the most appropriate instruments for technology policy measures.