Structural models of technology adoption

This dissertation consists of two essays, studying technology adoption decisions from both the demand/consumer side and supply/firm side by using structural models. Essay 1 investigates consumers' ATM card adoption decisions and Essay 2 examines firms' 56K modem adoption decisions in 1997.The second essay, "Are All Managers Created Equal", explores the idea that managers have different strategic thinking levels when playing a simultaneous entry game. Based on the cognitive hierarchy framework of Camerer, Ho and Chong (2004), we develop a structural model that estimates the level of strategic thinking. In the model, firms with a high level of strategic thinking are more likely to correctly conjecture the expected actions of their competitors. We apply this model to decisions by 2,233 Internet Service Providers to offer their customers access through 56K modems in 1997. The model is validated by showing that firms with a higher probability of strategic thinking were more likely to have survived through April 2007. The estimation results show considerable heterogeneity in the degree to which firms behave strategically and suggest that strategic ability affects marketing outcomes: a simulated increase in strategic ability means that fewer firms offer the technology to their customers.The first essay, "Dynamics of Consumer Adoption of Financial Innovations: the Case of ATM Cards", offers a new explanation to a stylized fact---seniors' low technology adoption rate. Previous literature tries to rationalize this fact by arguing that seniors have psychological resistance toward technology, or they have more difficulties in learning new technologies. However, one potential explanation has been neglected: the elderly have shorter life horizons than the young, and consequently they have smaller discounted adoption benefits. To capture this, we model consumers to be forward-looking and solve a finite-horizon dynamic programming problem when making adoption decisions. We apply this framework to the case of ATM cards. To measure monetary benefits from ATM card adoption, we also model how consumers make cash withdrawal decisions. We estimate the structural parameters by using a micro-level panel dataset. We find evidence that the elderly may not have larger monetary adoption costs for ATM cards.