The primary objective of this research project is to develop new methods for studying the adoption of technological innovations of uncertain profitability. The focus will be on situations where learning about the technology, either from one's own past experience, or from the success of others, is significant. It is important since externalities between adopters imply that diffusion occurs at less than the socially optimal rate. Empirical analysis of such situations also raises interesting methodological questions. The proposed study has three parts. First, the interdependence of farmers' decisions will be given a theoretical foundation. Incorporating learning, the decision problem for each farmer is a dynamic programming problem and equilibrium adoption paths are found by applying the appropriate apparatus. Second, econometric models reflecting strategic interdependence in farmers' decisions must be developed. The path of adoption of a new technology reflects dynamic discrete choice optimization. A simulated methods of moments procedure will be used to estimate a dynamic system with neighborhood effects. Finally, the theoretical and econometric models developed will be tested using a ten year panel data set from the International Crops Research Institute for the SEmi-Arid Tropics. The study will be of the adoption of higher yielding varieties cotton in the semi- arid tropics of India.
