Modeling technology adoptions for sustainable development under increasing returns, uncertainty, and heterogeneous agents

This paper presents a stylized model of technology adoptions for sustainable development under the three potentially most important “stylized facts”: increasing returns to adoption, uncertainty, and heterogeneous agents following diverse technology development and adoption strategies. The stylized model deals with three technologies and two heterogeneous agents: a risk-taking one and a risk-averse one. Interactions between the two agents include trade in resources and goods, and technological spillover (free riding and technology trade). With the two heterogeneous agents, we run optimizations to minimize their aggregated costs in order to find out what rational behaviors are under different assumptions if the two agents are somehow cooperative. By considering uncertain carbon taxes, the model also addresses environmental issues as potential driving forces for technology adoptions.