Cost Innovation: Schumpeter and Equilibrium. Part 1. Robinson Crusoe

Martin Shubik and William Sudderth
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William Sudderth: University of Minnesota

No 1786, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Modifying a parallel dynamic programming approach to a simple deterministic economy, we consider the effect of an innovation in the means of production. The success of the innovation is assumed to depend on the availability of financing, locus of financial control, the amount of resources invested, and on a random event. The relationship between money and physical assets is critical. In this first part stress is laid on the innovation behavior of Robinson Crusoe in a premonetary economy, then on his actions in a monetary economy in partial equilibrium. Part 2 considers the closed monetary economy with several differentiated agents.

Keywords: Cost innovation; Schumpeter; Circular flow; Strategic market games (search for similar items in EconPapers)
JEL-codes: C73 D24 G32 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011-03, Revised 2011-08
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Citations: View citations in EconPapers (1)

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Working Paper: Cost Innovation: Schumpeter and Equilibrium - Part 1: Robinson Crusoe (2011)
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