Adoption Delay of New Technology Always Disadvantageous to Consumers

By assessing the economic welfare implications of developing and introducing a gene-edited banana on global production, researchers were able to determine that consumers will always benefit from the adoption of a technological solution, but it is not necessarily the same for producers. Moreover, a five-year delay in adoption can result in discounted losses of US$94 billion.

The researchers from Ecuador and the United States used a model that incorporated disease dynamics, the banana disease Fusarium wilt in this case, and the diffusion of a technological solution to quantify the gains from reducing regulatory delay and improving the speed of development when adopting a new technological innovation. Their significant findings include:

1. Consumers always lose from the delay, but the impact on producers is not driven only by adoption. Rather, it depends on the timing and severity of the disease. 
2. There is a need for public sector support for R&D because the private sector will tend to underinvest in innovation. Collaborative efforts from public institutions and the private sector are also encouraged to reduce the negative impacts among producers.
3. Delay in regulatory approval reduces gains from a new technology for society and industry.
4. Policy makers must recognize that there is a social cost to regulatory requirements or lack of investments in research that delays any technological introduction.
5. The lack of acceptance of a technological solution in large importing markets will tend to increase welfare losses from the spread of the disease.

Their recommendations include:

1. Future research to incorporate the findings above in the case of gene-edited products to examine the impacts on other commodity markets; and
2. Additional study to explore the interdependency between diffusion of a disease and the adoption of a solution, product differentiation based on quality and other features, and markets under imperfect competition when calculating the welfare change from adoption.

According to the researchers, the results above should be interpreted as potential benefits from the adoption and help determine how adoption delay affects economic groups differently.

Learn more from the Journal of the Agricultural and Applied Economics Association.