Myopic Selection

19 Pages Posted: 9 Mar 2003

See all articles by Paul A. Geroski

Paul A. Geroski

London Business School; Centre for Economic Policy Research (CEPR)

Mariana Mazzucato

The Open University

Abstract

The severity of selection mechanisms and the myopia of selection are explored through a duopoly model where one firm tries to move down a learning curve in which costs are initially higher than its rival's but ultimately much lower. A trade-off is found between catch-up time and asymptotic market share: The more severe are selection pressures, the less likely is it that the learning technology will survive; however, if it does survive, the learning technology will in the limit be more competitive the more severe are selection pressures. We explore the dynamics of the model under unit cost and strategic pricing and find that the optimal pricing rule depends on the parameters governing firm learning and market selection.

Suggested Citation

Geroski, Paul A. and Mazzucato, Mariana, Myopic Selection. Available at SSRN: https://ssrn.com/abstract=312811

Paul A. Geroski (Contact Author)

London Business School ( email )

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Centre for Economic Policy Research (CEPR)

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Mariana Mazzucato

The Open University ( email )

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+44 1908 654488 (Fax)

HOME PAGE: http://www.open.ac.uk/socialsciences/staff/people-profile.php?name=Mariana_Mazzucato

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