Innovate or Imitate? Behavioural Technological Change

Tinbergen Institute Discussion Paper 13-099/II

30 Pages Posted: 27 Jul 2013

See all articles by Cars H. Hommes

Cars H. Hommes

Government of Canada - Bank of Canada; CeNDEF, Amsterdam School of Economics, University of Amsterdam; Tinbergen Institute

Paolo Zeppini

Eindhoven University of Technology (TUE)

Date Written: July 19, 2013

Abstract

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.

Keywords: C62, C73, D21, O33

JEL Classification: discrete choice, innovation patterns, learning curves, switching behavior

Suggested Citation

Hommes, Cars H. and Zeppini, Paolo, Innovate or Imitate? Behavioural Technological Change (July 19, 2013). Tinbergen Institute Discussion Paper 13-099/II, Available at SSRN: https://ssrn.com/abstract=2296003 or http://dx.doi.org/10.2139/ssrn.2296003

Cars H. Hommes (Contact Author)

Government of Canada - Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

CeNDEF, Amsterdam School of Economics, University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, NL-1018WB
Netherlands

HOME PAGE: http://https://www.uva.nl/en/profile/h/o/c.h.hommes/c.h.hommes.html

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Paolo Zeppini

Eindhoven University of Technology (TUE) ( email )

PO Box 513
Eindhoven, 5600 MB
Netherlands

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