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Evolution in a Walrasian setting

Accinelli, Elvio and Covarrubias, Enrique (2015): Evolution in a Walrasian setting.

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Abstract

This paper models the dynamic of a sector where firms imitate the technology of leading firms. While it would seem natural to expect that managers will aim at producing with the technology that produces the highest benefits, if many other managers also follow this behavior, the market structure might be modified so much that the advantage associated with a high-profit technology might be erased or even reverse. By modeling this imitation process with replicating dynamics, we find that even if the parameters of the economy are continuous through time and the economy follows a path of competitive equilibria, endogenous discrete jumps in technological choices occur.

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