EPRG 0923

D. Hamilton, W. J. Nuttall, F. A. Roques

Agent-Based Simulation of Technology Adoption: Possible phenomenologies associated with consumer shifts to local electricity generation

EPRG 0923 Non-Technical Summary | PDF

Abstract: We present an agent based model of technology diffusion where bounded rational agents are faced with uncertainty about the performance of the new technology versus the old technology as well as spatial externalities. We observe that a wide range of possible phenomena emerge, including modest evolutionary change, ‘S-curve’ technology adoption, as well as  more disruptive “punctuated equilibrium” patterns of adoption. The off-equilibrium diffusion trajectory can be characterised by radical and unstable shifts in the system reminiscent of critical effects in phase transition physics. We also study the impact of a specific form of spatial externality on patterns of technology diffusion, which models some kind of “fashion effect”. We find that such externality leads to the emergence of clustering in the adoption of technology. Our model findings are discussed in the light of the changing paradigm of electricity supply, from the current centralised grid supply to decentralised electricity generation technologies based on combined heat and power systems as well as solar panels, whose adoption is believed to be partly driven by such “fashion effect”.

Keywords: Agent-based Simulation, Technology Diffusion, Fashion,

JEL Classifiation: C63, O63