Abstract
We develop a general equilibrium model where there are opportunities to abandon existing technologies and adopt new technologies. We study how technologies change endogenously in an equilibrium and the effect of technological changes on the equilibrium. We find that locally the equilibrium resembles that from Cox et al. (1985, Econometrica 53, 363–384); globally, the equilibrium can be viewed as the equilibria from CIR economies pasted together. We also find that, while the equilibrium consumption and security price processes are continuous, the equilibrium return processes experience jumps at the time of technological changes.
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