Resource title

To innovate or not to innovate

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Resource description

In this paper we analyze the evolution of output decisions of adaptive firms in an environment of oligopolistic competition. The firm might either choose to produce one of several existing product variants or try to establish a new product variant on the market. The demand for each individual product variant is subject to a life-cycle, but aggregate demand for product variants is constant over time. Every period each firm has to decide whether to produce the product again, to introduce a new product variant itself (which generates an initial advantage on that market), or to follow another firm and change to the production of an already established product. Different firms have heterogeneous abilities to develop products respectively imitate existing designs, and therefore the effects of the decision whether to imitate existing designs or to innovate differ between firms. We examine the evolution of behavior in this market using an agent based simulation model. The firms are endowed with simple rules to estimate market potentials and market founding potentials of all firms including themselves, and make their decisions using a stochastic learning rule. Furthermore, the characteristics of the firms change dynamically due to 'learning by doing' effects. The main questions discussed are how the success and the optimal strategy of a firm depend on the interplay between characteristics of the industry and properties of the firm. (author's abstract) ; Series: Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science"

Resource author

Bernd Bullnheimer, Herbert Dawid, Marc Reimann

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Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://epub.wu.ac.at/784/1/document.pdf

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Adapt according to the license agreement. Always reference the original source and author.