Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2013-07-26 Number: 13-099/II Author-Name: Cars Hommes Author-Workplace-Name: CeNDEF, University of Amsterdam Author-Name: Paolo Zeppini Author-Workplace-Name: School of Innovation Sciences, Eindhoven University of Technology Title: Innovate or imitate? Behavioural Technological Change Abstract: This discussion paper led to a publication in the 'Journal of Economic Dynamics and Control', 2014, 48, 308–324.
We propose a behavioural model of technological change with evolutionary switching between boundedly rational 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 characterized 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 empirical data of two industrial sectors. Classification-JEL: C62, C73, D21, O33 Keywords: discrete choice, innovation patterns, learning curves, switching behavior File-Url: http://papers.tinbergen.nl/13099.pdf File-Format: application/pdf File-Size: 721016 bytes Handle: RePEc:tin:wpaper:20130099