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Markov-perfect industrial dynamics with technological path dependence


  • Fernando Vega-Redondo

    (Facultad de Economicas, Instituto Valenciano de Investigaciones Economicas, Universidad de Alicante, E-03071 Alicante, Spain)


A game-theoretic intertemporal model of industrial competition is proposed where firms choose their optimal technological strategies as part of some (Markov Perfect) equilibrium with potential entry and exit. The main novel feature of the approach is that technological change is modelled along a directed graph of technologies, which permits a rigorous consideration of key issues such as technological gaps, switching costs and gradual innovation. The paper provides some sufficient conditions for existence and ergodicity of the equilibrium, partially studies the induced population dynamics, and explores a number of other issues by means of numerical simulations.

Suggested Citation

  • Fernando Vega-Redondo, 1999. "Markov-perfect industrial dynamics with technological path dependence," Spanish Economic Review, Springer;Spanish Economic Association, vol. 1(1), pages 21-54.
  • Handle: RePEc:spr:specre:v:1:y:1999:i:1:p:21-54

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    More about this item


    Industrial dynamics; technological change; path-dependence;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives


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