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## WHAT IS IT?

This is a NetLogo version of the Nelson & Winter's industry dynamics mode presented in Chap.12&14 of Nelson, R. and S. Winter, 1984, An Evolutionary Theory of Economic Change, Belknapp Press, Cambridge: MA and in R. R. Nelson and S. G. Winter. The Schumpetarian tradeoff revisited. The American Economic Review, 72:114–132, 1982.

You can find a quick description of this model at the following address: http://yildizoglu.fr/nelwin/

In this model the dynamics of the industry, and its structure are determined by the innovative and imitative R&D activity of the firms.

## HOW IT WORKS

Technical progress is embodied, and a better technique corresponds to a higher productivity of the capital, the only production factor in this model.
Given its productivity A and its capital stock K, each firm produces Q = A x K
and the market period is determined through a temporal equilibrium between the demand and this suply. The unit using cost of the capital is a constant c. Given this cost, and the current price, each firm can compute its profit as
Profit = (p - c/A)*Q
Firms invest in R&D and in physical capital, and these investments determine their productivity and capital stock for the next period. The investment in capital stock is pulled by Cournot conjectures, and the industry converged towards a Cournot equilibrium if we stop the technical progress and the evolution of productivities.

## HOW TO USE IT

You can start with the default values of these parameters that mainly correspond to the ones used by Nelson and Winter.
The user fixes the initial easiness to innovate and imitate through the initial probabilities of success in innovation and in imitation.
Other important parameters concern the number of each type of firms:
- The innovators aims to innovate and imitate in each period (they invest on both types of R&D), while
-the imitators only invest in the imitative R&D

## THINGS TO NOTICE

When you start with a value of zero for the probabilities to innovate, nothing happens: the model starts in a Cournot equilibrium and remains ther because no innovation can perturbate it.

When the initial probaility of innovation is positive, the industry starts to move as soon as the first innovation happens. The evolution of the maximal/average/minimal productivities indicate the evolution of the technologies of the firms.

## THINGS TO TRY

You can start without any imitators and increase slowly the initial probability of innovation to check the evolution of the industry as a consequence of the facility of innovating.
You can then come back to a low initial probability to innovate (around 3-5%) and start to add some imitators while keeping constant the number of firms.
You should especially observe the evolution of concentration as a consequence of the facility of imitation.

## EXTENDING THE MODEL

The user could easily introduce the extensions considered by
Winter, S. (1984), 'Schumpeterian Competition in Alternative Technological Regimes', Journal of Economic Behavior and Organization 5, 287-320.

## NETLOGO FEATURES
This model is too simple to necessitate any remarkable feature of NetLogo.

## RELATED MODELS

## CREDITS AND REFERENCES

(c) Murat Yildizoglu, 2014-. Maybe freely distributed and modified.
http://yildizoglu.fr

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