TECHNOLOGY VALUATION DISTRIBUTIONS WITH HETEROGENEOUS ADOPTERS
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This paper examines technology benefit allocation between an innovating firm and heterogeneous technology adopters. Using a triangular distribution of adopter innovation value, we find that as the upper bound increases, optimal innovation price increases, but at a slower rate. Similarly, as the lower bound decreases, price decreases and producer benefits increase. Finally, greater producer heterogeneity leads to greater producer benefits from innovation in non-competitive markets. An empirical application of the model is considered, bovine somatotropin adoption on dairy farms. The model generates an intuitive explanation of the common finding that average adopters are making zero or negative profits.