Innovate or Imitate? Behavioural technological change

Cars Hommes, Paolo Zeppini

Research output: Contribution to journalArticle

13 Citations (Scopus)
123 Downloads (Pure)

Abstract

We propose a behavioural model of technological change with evolutionary switching between costly innovators and free imitators, and study the endogenous interplay of innovation decisions, market price dynamics and technological progress. Innovation and imitation are strategic substitutes and exhibit negative feedback. Endogenous technological change is the cumulative outcome of innovation decisions. There are three scenarios: market breakdown, Schumpeterian rents and learning curves. The latter is characterised by an increasing fraction of innovators when demand is elastic, while inelastic demand allows technological progress with shrinking innovation effort. Model simulations are compared to stylised features of empirical data in two industrial sectors.
Original languageEnglish
Pages (from-to)308-324
Number of pages17
JournalJournal of Economic Dynamics and Control
Volume48
Early online date14 Aug 2014
DOIs
Publication statusPublished - 1 Nov 2014

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