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Learning-by-Doing, Organizational Forgetting, and Industry Dynamics

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Learning-by-doing and organizational forgetting have been shown to be important in a variety of industrial settings. This paper provides a general model of dynamic competition that accounts for these economic fundamentals and shows how they shape industry structure and dynamics. Previously obtained results regarding the dominance properties of firms' pricing behavior no longer hold in this more general setting. We show that forgetting does not simply negate learning. Rather, learning and forgetting are distinct economic forces. In particular, a model with learning and forgetting can give rise to aggressive pricing behavior, market dominance, and multiple equilibria, whereas a model with learning alone cannot.

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  • David Besanko & Ulrich Doraszelski & Yaroslav Kryukov & Mark Satterthwaite, 2008. "Learning-by-Doing, Organizational Forgetting, and Industry Dynamics," GSIA Working Papers 2009-E22, Carnegie Mellon University, Tepper School of Business.
  • Handle: RePEc:cmu:gsiawp:1252685262
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    File URL: http://www.andrew.cmu.edu/user/kryukov/Learning.pdf
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    Cited by:

    1. Fudenberg, Drew & Yamamoto, Yuichi, 2011. "The folk theorem for irreducible stochastic games with imperfect public monitoring," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1664-1683, July.

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