Learning-by-Doing, Organizational Forgetting and Industry Dynamics

69 Pages Posted: 19 May 2008

See all articles by David Besanko

David Besanko

Northwestern University - Kellogg School of Management

Ulrich Doraszelski

Harvard University - Department of Economics; University of Pennsylvania - Business & Public Policy Department

Yaroslav (Steve) Kryukov

Northwestern University - Department of Economics

Mark Satterthwaite

Northwestern University - Kellogg School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: March 2007

Abstract

Learning-by-doing and organizational forgetting have been shown to be important in a variety of industrial settings. This paper provides a general model of dynamic competition that accounts for these economic fundamentals and shows how they shape industry structure and dynamics. Previously obtained results regarding the dominance properties of firms' pricing behaviour no longer hold in this more general setting. We show that organizational forgetting does not simply negate learning-by-doing. Rather, learning-by-doing and organizational forgetting are distinct economic forces. In particular, a model with both learning-by-doing and organizational forgetting can give rise to aggressive pricing behaviour, market dominance, and multiple equilibria, whereas a model with learning-by-doing alone cannot.

Keywords: Dynamic games, learning-by-doing, organizational forgetting

JEL Classification: C73, D43

Suggested Citation

Besanko, David A. and Doraszelski, Ulrich and Kryukov, Yaroslav (Steve) and Satterthwaite, Mark A., Learning-by-Doing, Organizational Forgetting and Industry Dynamics (March 2007). CEPR Discussion Paper No. DP6160. Available at SSRN: https://ssrn.com/abstract=1133804

David A. Besanko (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States
847-467-6505 (Phone)
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Ulrich Doraszelski

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-2896 (Phone)
617-495-8570 (Fax)

University of Pennsylvania - Business & Public Policy Department

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

Yaroslav (Steve) Kryukov

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

Mark A. Satterthwaite

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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