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The Technology Life Cycle (TLC) represents the commercial profit of a product due to R&D stage expenditures and economic profit during its "lifetime". Some technologies, such as steel, paper, and cement manufacturing, have long lives (small technological changes are introduced over time), while others, such as electronics and pharmaceuticals, can have very short lives. There is a nature. TLC related to technology products or services is different from the Product Life Cycle (PLC) described in Product Life Cycle Management. The latter concerns the durability of products on the market in terms of timing of launch, marketing efforts, and commercial costs. The technology behind a product (for example, the technology of a single scented tea) may be very contingent, but the process of creating and managing one's life as a branded product is very different. The technology lifecycle includes the time and cost of technology development, a cost recovery plan, and how the technology is delivered for benefits commensurate with the associated costs and risks. In addition, TLC may be protected by in-cycle patents and trademarks designed to extend the cycle and maximize profits.
'''Imperfect [[information]]''' is the condition that occurs in the [[market]] when one or more traders have more precise information than others. This concept is therefore studied in [[economics]] and is directly applicable to business scenarios, where the presence of information asymmetries is useful for explaining the different behaviors of the various economic subjects.


Products of technology can be commodities like polyethylene plastic or sophisticated products like the integrated circuits used in smartphones. Competitive product or process development can have a significant impact on a technology's lifespan by shortening it. Similarly, the loss of intellectual property rights through litigation or the loss of secret elements (if any) through leakage can also shorten the life of a technology. Thus, it is clear that the management of TLC is an important aspect of technology development. Most new technologies follow a similar technology maturity life cycle that represents the technical maturity of the product. Unlike the product lifecycle, it refers to an entire technology or generation of technology. Technology adoption is the most prevalent phenomenon behind industry development throughout the industry life cycle. Eventually, after expanding new uses for resources, they exhaust the efficiency of those processes, making them easier at first and producing greater returns over time, but becoming harder to exhaust as the technology matures<ref>Bunduchi R., Marina C (2022), p4</ref>.  
When information is not fully shared among the subjects who are part of the same economic [[process]], we can therefore speak of imperfect information. And therefore a part of the interested parties has more information than the rest of the participants and can thus benefit from this situation.


==Four steps of the life cycle of technology==
There are many situations in which imperfect information occurs, but they can almost all be grouped into these 3 cases:
===Innovation Phase:===
* Adverse selection
This phase represents the birth of new products, process materials that are the result of R&D activities. In the R&D lab, new ideas are generated based on needs and knowledge elements. Depending on resource allocation and change factors, the amount of time required varies greatly between both the innovation phase and subsequent phases.
* Reporting and selection
* Moral hazard


===Syndication Phase:===
==Adverse selection==
This phase represents the demonstration and commercialization of new technologies such as: B. A product, material, or process with potential immediate application. Many innovations are pending in R&D labs. Only a few of them have been commercialized. Commercialization of research results depends on technical and non-technical factors, mainly economic factors.
Adverse selection is a classic example of information asymmetry that mainly affects the ''[[insurance]] sector''.


===Penetration Level:===
In fact, in quantifying the [[price]] of the policy, insurance companies start from a lack of [[knowledge]] of the actual possibility that the event that is then the subject of a reimbursement request will occur. The [[cost]] of the policy is therefore established on an estimate of the average cost of the damaging event. Therefore, insurance companies find themselves in a condition of information asymmetry with respect to their customers, who are instead more aware of their degree of [[risk]] of the insured object<ref>Cohen A., Siegelman P. (2010)</ref>.
This represents the market penetration of a new technology due to the acceptance of the innovation by potential users of the technology. However, supply and demand factors together affect penetration.


===Substitution Level:===
==Reporting and selection==
This final level represents the potential for reduction and expansion of a technology's use by substitution by another technology. Many technical and non-technical factors affect replacement rates. The duration of the replacement phase depends on market dynamics <ref>Markard J. (2020), p8</ref>.
To explain this type of information asymmetry, let's start with the cases of sending the ''curriculum vitae''.
Those who send a CV to participate in a selection present themselves with a series of information related to their studies, aptitudes and interests.
However, the truthfulness of this information is possessed only by the person sending the CV and not by the person receiving it. The recruiter could then make choices, simply based on this information. Hence the information asymmetry.
So signaling consists of the process put in place by the potential candidate, while selection includes the mix of actions that the recruiter can carry out. The major difficulty is represented by the fact that the subject who finds himself in the situation of information asymmetry can only carry out a series of checks on the information and declarations issued by the counterparty.


==Sustainable==
==Moral hazard==
In the area of sustainable consumption and production, top-down studies of national economies help identify key consumption sectors and factors of environmental impact. For example, housing, mobility and food (especially heating and cooling of buildings, car and air travel, meat and dairy consumption) account for the majority of environmental impacts in Europe. More detailed 'bottom-up' studies of individual products or product groups link key impact drivers to the most commonly relevant life cycle stages, such as in packaging where impact has been shown to be high. It also helped identify things that may not have been done.
Moral hazard is a situation that occurs, for example, when you have a fault with an appliance and take it for repair. You are not experts in that field, and therefore entrust your object to the hands of an expert. If he is honest, he just replaces the damaged piece, in other cases he could take advantage of your "ignorance" to change other parts and thus increase his [[profit]]. This situation is referred to as moral hazard<ref>Douglas S., Thevaranjan A. (2010)</ref>.
Basically, two processes reduce the environmental impact of production. These can occur at the end of the process (end of pipe) or during the production process, depending on integrated production technology (cleaner production). These two types of technology are good for the environment in both the short and long term, but they have opposite effects.
Additional technologies, such as desulfurization filters, are designed to reduce emissions of pollutants that are by-products of production. They therefore consist of implementing additive technology to limit pollutant emissions.
Integrated technology reduces resource consumption and pollution at source by using cleaner production methods. In principle, they lead to a reduction in the use of co-products, energy and resources used by companies to manufacture their products <ref>Finkbeiner M., Erwin M. Schau, Lehmann A., Traverso M. (2010), p14</ref><ref>Hellweg S., Llorenç M. (2014), p2</ref>.


==Footnotes==  
==Why it is important for companies to use information asymmetry==
<references/>
Situations of information asymmetry consequently imply an '''information advantage'''. The subject or [[company]] that has an informational advantage can therefore make a series of choices in its favor.
Being in informational advantage conditions the choice of the characteristics of the contract between the '''principal''', the one who proposes the contract, and the '''agent''', the one who can accept or refuse. From these two names comes the expression '''"problems of agency"'''<ref>Wiseman R., Cuevas-Rodríguez G., Gomez-Mejia L.(2012)</ref>.


== References ==
If the parties had common interests, all [[relevant information]] would be immediately exchanged and consequently, there would be no information asymmetry condition. If, on the other hand, one of the two parties has more or less information, this translates into greater contractual capacity. Information power is therefore synonymous with contractual and economic power.


Bunduchi R., Marina C (2022) [https://doi.org/10.1111/1467-8551.12562 ''Technology Legitimation: A Product-Level Examination Across the Technology Lifecycle''] British Journal of Management, Edingurgh p4
==Agency costs==
Finkbeiner M., Erwin M. Schau, Lehmann A., Traverso M. (2010) [https://doi.org/10.3390/su2103309''Towards Life Cycle Sustainability Assessment''] Journal of Sustainability, Berlin p14
[[Agency costs]] are those that arise due to the conflict of [[interest]] between principal and agent.
Hellweg S., Llorenç M. (2014) [https://doi.org/10.1126/science.1248361 ''Emerging approaches, challenges and opportunities in life cycle assessment''] Sciencemag, USA p2
Markard J. (2020) [https://doi.org/10.1016/j.techfore.2018.07.045''The life cycle of technologicalinnovation systems''] Technological forecasting and social change, Switzerland, p8


The '''principal''' is the person hiring and the '''agent''' is the one hired. The latter carries out its [[work]] on behalf of the former. Therefore, both the agent and the principal can be an individual or an [[organization]] of any kind.
The contract generates costs since the [[client]] does not have [[perfect information]] about his counterparty. An example of this situation is when a company's shareholders hire managers to run it. On the one hand, shareholders may be interested in maximizing the share price to increase their wealth. Likewise, they would be interested in paying out more dividends. On the other hand, managers would be more interested in the growth and consolidation of the company. This does not necessarily lead to stock price growth or higher dividends in the near term. As a result, a conflict arises over the priorities of the parties involved<ref>Wiseman R., Cuevas-Rodríguez G., Gomez-Mejia L.(2012)</ref>.
There are several methods used to minimize agency costs.
Some of them are:
* '''Monitoring agent activity:''' This could be a solution when activities are easy to measure and monitor. However, the more complicated it is to control, the more cost it generates to monitor. For example, you can set income goals or [[production]] levels.
* '''Giving incentives:''' The goal here is to ensure that the agent and the principal have the same interests. For example, through the granting of shares and [[options]], and the payment of commissions. [[Efficiency]] pay can also be considered.
In general, the risk of conflict is minimized by reducing information asymmetry. That is, the clearer the agent's interests are, the lower the costs involved in the relationship. Furthermore, incentives have the goal that each individual, pursuing his interests, achieves the goal of the group.
==Footnotes==
<references />
{{infobox5|list1={{i5link|a=[[Agency cost]]}} &mdash; {{i5link|a=[[Sales techniques]]}} &mdash; {{i5link|a=[[Phoenix company]]}} &mdash; {{i5link|a=[[Compromise]]}} &mdash; {{i5link|a=[[Placement fee]]}} &mdash; {{i5link|a=[[Pure risk]]}} &mdash; {{i5link|a=[[Diversity management]]}} &mdash; {{i5link|a=[[Negotiation style]]}} &mdash; {{i5link|a=[[Gharar]]}} }}
==References==
* Cohen A., Siegelman P. (2010), [https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1539-6975.2009.01337.x ''Testing for Adverse Selection in Insurance Market'']. Journal of Risk and and Insurance.
* Douglas S., Thevaranjan A. (2010), [https://www.sciencedirect.com/science/article/abs/pii/S0361368209000221 ''A moral solution to the moral hazard problem'']. Accounting, Organizations and Society. Volume 35, Issue 1, Pages 125-139.
* Wiseman R., Cuevas-Rodríguez G., Gomez-Mejia L.(2012). [https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-6486.2011.01016.x ''Towards a Social Theory of Agency'']. Journal of [[Management]] Studies.
{{a|Alice Nicoletti}}
[[Category:Economics]]
[[Category:Economics]]
{{a|SACRE Antoine}}

Latest revision as of 23:32, 17 November 2023

Imperfect information is the condition that occurs in the market when one or more traders have more precise information than others. This concept is therefore studied in economics and is directly applicable to business scenarios, where the presence of information asymmetries is useful for explaining the different behaviors of the various economic subjects.

When information is not fully shared among the subjects who are part of the same economic process, we can therefore speak of imperfect information. And therefore a part of the interested parties has more information than the rest of the participants and can thus benefit from this situation.

There are many situations in which imperfect information occurs, but they can almost all be grouped into these 3 cases:

  • Adverse selection
  • Reporting and selection
  • Moral hazard

Adverse selection

Adverse selection is a classic example of information asymmetry that mainly affects the insurance sector.

In fact, in quantifying the price of the policy, insurance companies start from a lack of knowledge of the actual possibility that the event that is then the subject of a reimbursement request will occur. The cost of the policy is therefore established on an estimate of the average cost of the damaging event. Therefore, insurance companies find themselves in a condition of information asymmetry with respect to their customers, who are instead more aware of their degree of risk of the insured object[1].

Reporting and selection

To explain this type of information asymmetry, let's start with the cases of sending the curriculum vitae. Those who send a CV to participate in a selection present themselves with a series of information related to their studies, aptitudes and interests. However, the truthfulness of this information is possessed only by the person sending the CV and not by the person receiving it. The recruiter could then make choices, simply based on this information. Hence the information asymmetry. So signaling consists of the process put in place by the potential candidate, while selection includes the mix of actions that the recruiter can carry out. The major difficulty is represented by the fact that the subject who finds himself in the situation of information asymmetry can only carry out a series of checks on the information and declarations issued by the counterparty.

Moral hazard

Moral hazard is a situation that occurs, for example, when you have a fault with an appliance and take it for repair. You are not experts in that field, and therefore entrust your object to the hands of an expert. If he is honest, he just replaces the damaged piece, in other cases he could take advantage of your "ignorance" to change other parts and thus increase his profit. This situation is referred to as moral hazard[2].

Why it is important for companies to use information asymmetry

Situations of information asymmetry consequently imply an information advantage. The subject or company that has an informational advantage can therefore make a series of choices in its favor. Being in informational advantage conditions the choice of the characteristics of the contract between the principal, the one who proposes the contract, and the agent, the one who can accept or refuse. From these two names comes the expression "problems of agency"[3].

If the parties had common interests, all relevant information would be immediately exchanged and consequently, there would be no information asymmetry condition. If, on the other hand, one of the two parties has more or less information, this translates into greater contractual capacity. Information power is therefore synonymous with contractual and economic power.

Agency costs

Agency costs are those that arise due to the conflict of interest between principal and agent.

The principal is the person hiring and the agent is the one hired. The latter carries out its work on behalf of the former. Therefore, both the agent and the principal can be an individual or an organization of any kind.

The contract generates costs since the client does not have perfect information about his counterparty. An example of this situation is when a company's shareholders hire managers to run it. On the one hand, shareholders may be interested in maximizing the share price to increase their wealth. Likewise, they would be interested in paying out more dividends. On the other hand, managers would be more interested in the growth and consolidation of the company. This does not necessarily lead to stock price growth or higher dividends in the near term. As a result, a conflict arises over the priorities of the parties involved[4].

There are several methods used to minimize agency costs. Some of them are:

  • Monitoring agent activity: This could be a solution when activities are easy to measure and monitor. However, the more complicated it is to control, the more cost it generates to monitor. For example, you can set income goals or production levels.
  • Giving incentives: The goal here is to ensure that the agent and the principal have the same interests. For example, through the granting of shares and options, and the payment of commissions. Efficiency pay can also be considered.

In general, the risk of conflict is minimized by reducing information asymmetry. That is, the clearer the agent's interests are, the lower the costs involved in the relationship. Furthermore, incentives have the goal that each individual, pursuing his interests, achieves the goal of the group.

Footnotes

  1. ↑ Cohen A., Siegelman P. (2010)
  2. ↑ Douglas S., Thevaranjan A. (2010)
  3. ↑ Wiseman R., Cuevas-Rodríguez G., Gomez-Mejia L.(2012)
  4. ↑ Wiseman R., Cuevas-Rodríguez G., Gomez-Mejia L.(2012)


Imperfect information — recommended articles
Agency cost — Sales techniques — Phoenix company — Compromise — Placement fee — Pure risk — Diversity management — Negotiation style — Gharar

References

Author: Alice Nicoletti

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