Beyond replicator dynamics: Innovation-selection dynamics and optimal diversity

Karolina Safarzynska and Jeroen van den Bergh

Journal of Economic Behavior & Organization, 2011, vol. 78, issue 3, 229-245

Abstract: We propose a new evolutionary approach to model technological change based on an extension of replicator dynamics with recombination and mutation. It gives rise to interactive innovation-selection dynamics. The model allows studying the combined effects of selection and variety generation on evolutionary-economic change. The developed framework describes a population of boundedly rational entrepreneurs who decide each period on the allocation of investments in different production technologies. They tend to invest in below-average cost technologies, just as under replicator dynamics. In addition, they spend a constant fraction of investments, captured by mutation and recombination rates, on alternative technologies and research on recombinant innovation. As opposed to most previous studies, mutation and recombination are here conceptual variables with a concrete behavioral interpretation, namely describing the decision rules (heuristics) of investors. We compare the dynamics of shares of investments in various technologies for three cases: with constant costs of capital, with costs decreasing steadily and exogenously over time, and with costs depending on the level of cumulative investments. For each model version, we examine under which conditions the coexistence of technological options is feasible and optimal in terms of minimizing the average cost of investments.

Keywords: Bounded; rationality; Induced; technological; change; Investment; theory; Learning; curve; Optimal; diversity; Recombinant; innovation; Replicator; dynamics (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268111000229
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Beyond Replicator Dynamics: Innovation-Selection Dynamics and Optimal Diversity (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:78:y:2011:i:3:p:229-245

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().