Schumpeterian process competition, welfare and laissez-faire: An experiment in artificial economic evolution |
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Authors: | Timothy M Wakeley |
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Institution: | (1) School of Management, University of Bath, Claverton Down, Bath BA2 7AY, UK (e-mail: mnstw@management.bath.ac.uk), GB |
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Abstract: | A simulation model is used to construct a regime of artificial economic evolution, where Schumpeterian process competition
prevails, in the presence of technological uncertainty and bounded rationality. The output decision of the firm is represented
by a behavioural algorithm, which allows for the presence of collusive behaviour. The purpose of the experiments is to go
some way towards addressing the twin issues of the nature of the relationship between market structure and industry performance
in a dynamic setting, and the contention that the evolutionary metaphor implies a laissez-faire stance with respect to policy
issues. Under the simplifying assumptions of the model, experiments suggest that industries which generate high average concentration
over a given period can compare favourably with industries that generate low average concentration, if the time profiles of
both welfare and concentration are analysed. Also, the experiments suggest that the industry will naturally evolve a structure
best suited to exploit the technological environment, but despite this there is still a role for intervention into the competitive
process. |
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Keywords: | : Artificial economic evolution Schumpeterian competition Bounded rationality Collusion Laissez-faire |
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