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Optimal Policy Identification: Insights from the German Electricity Market

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... Last not least, the role of the demand side eects is not clear. Is it benecial for the knowledge discovery process in general and the GPT adoption in particular that society starts favoring a certain product development as it was the case, e.g., for nuclear power plants in the 1950s (Cowan, 1990) or renewable energy generation in the last two decades (Herrmann and Savin, 2016)? In both cases, the policy maker was providing large subsidies to discover a product with certain characteristics, while actual choice among dierent technological trajectories were left to innovating rms. ...
... Thus, any change in the rank of priorities can reect either changes in preferences or institutions. For example, policy instruments introduced in the German energy sector made it protable to concentrate on the renewable energy technologies (above all, wind and solar) (Herrmann and Savin, 2016 ). the product type, a critical decision with respect to the preferred technological trajectory had to be taken (in this case between light water, heavy water and gas graphite). Given that typically [...] when a technology is introduced its future payos are not well known (Cowan, 1990, p. 544), the choice has been made mainly based on knowledge accumulated by the U.S. Navy adopting the light water for submarine propulsion. ...
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