THE DECLINING PRICE PARADOX OF NEW TECHNOLOGIES

摘要

The declining prices of new technology products often results ina tendency for many decision makers to wait for lower prices, andto postpone a capital investment.This paper makes a distinction between the prices of technologyelements and the prices of components and systems. There aremany cases where the price reduction over time applies only tosome elements of the system, while the total price of theimproved system remains almost the same. For those cases, aDECLINING PRICE PARADOX is spelled out. The Paradox suggeststhat the more the price of the investment is subject to futurereduction, the more urgent it is to invest in this technology.The paper incorporates learning considerations in the investmentdecision making, and states the conditions where the paradoxapplies.