2003/12 LEM Working Paper Series

A Baseline Model of Industry Evolution

Sidney G. Winter, Yuri M. Kaniovski and Giovanni Dosi
Evolution, Competition, Stochastic entry, Industrial dynamics, Evolutionary games

  JEL Classifications
L11, O30, C60.

The paper analyses some general dynamic properties of industries characterized by heterogeneous firms and continuing stochastic entry. After a brief critical assessment of some significant drawbacks of recent contributions to modeling of stochastic industrial dynamics, we propose a novel analytical apparatus able to derive some generic properties of the underlying competition process combining persistent technological heterogeneity, differential growth of individual firms and turnover. The basic model, we suggest, is indeed applicable with proper modifications to a large class of evolutionary processes, well beyond industrial dynamics.

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