“Winners take all competition”, creative destruction and stock market bubble

Christophe Boucher

Finance from EconWPA

Abstract: From the model of Hobijn and Jovanovic (2001), we modelize a technological shock with uncertainty. We assume that this technological shock appears in the shape of new firms. Only a part of these firms will be productive. Uncertainty relates to the identification of the viable firms. This uncertainty decreases with the time and the diffusion of fundamentalist information that makes it possible to identify without error the viable firms. Without this fundamentalist information, the behavior of agents follows a rule of decision similar to that formulated by Heiner (1983). Uncertainty concerning the identification of viable firms which emerge of the technological shock, leads to a stock market bubble even though agents have a perfect knowledge of the impact of the shock and date on which it occurs. This type of uncertainty seems to characterize firms of the Information Communication Technology industries, which are confronted with a "winners take all" competition.

Keywords: Uncertainty; technological change; asset price bubble; winner takes all. (search for similar items in EconPapers)
JEL-codes: G12 O33 D81 D43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-ino and nep-rmg
Date: 2003-05-31
Note: Type of Document - Pdf
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0305010

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