Economic and Biological Evolution: A Non-Equilibrium and Real Option Approach

42 Pages Posted: 2 Dec 2000

See all articles by Jing Chen

Jing Chen

University of Northern British Columbia - School of Business

Date Written: July 2000

Abstract

Self-sustaining non-equilibrium systems, such as economic and biological systems, can be modeled with option pricing theory. We recognize that variable cost of a production mode can be represented by call option price with fixed cost as the strike price. This analytic representation enables us to utilize the rich results from the option theory systematically and provides an analytic framework for the thermodynamic foundation of economics. We show that the main theme of biological and economic evolution is the tradeoff between competitiveness in stable environment and resilience in volatile environment.

Keywords: non-equilibrium systems, real option theory, creative destruction

JEL Classification: A00,A12, F10, G13, J13, J61, O15

Suggested Citation

Chen, Jing, Economic and Biological Evolution: A Non-Equilibrium and Real Option Approach (July 2000). Available at SSRN: https://ssrn.com/abstract=250235 or http://dx.doi.org/10.2139/ssrn.250235

Jing Chen (Contact Author)

University of Northern British Columbia - School of Business ( email )

Prince George, BC, V2N 4Z9
Canada
250-960-6480 (Phone)
250-960-5544 (Fax)

HOME PAGE: http://web.unbc.ca/~chenj/

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