Topic: “Strategic Complementarities in a Dynamic Model of Fintech Adoption” 12:15-13:30 via Zoom
Abstract
This paper develops a dynamic model of technology adoption featuring a network effect, in which the benefits
for users increase with the number of adopters. We argue that such an effect is an inherent feature of several
technologies, such as means of payments. We show that network effects give rise to multiple equilibrium
paths, multiple steady states, and suboptimal allocations. The model generates slow adoption, as individuals
optimally wait for others to adopt before doing so. We apply the theory to the adoption of SINPE, an electronic
means of payment developed by the Central Bank of Costa Rica. Transaction-level data on the use of SINPE and
a battery of administrative data sets on the network structure allow us to document sizable network effects
exploiting plausible exogenous variation. A calibrated version of the model shows that the optimal subsidy
pushes the economy to universal adoption.
Co-Authors: Fernando Alvarez, University of Chicago; David Argente, Pennsylvania State University; Esteban
Méndez, Central Bank of Costa Rica; Diana van Patten, Yale University