Innovation and Evolution as a Dynamic Game with Rational Behaviour

Abstract

In the recent literature about the explanation of the behaviour of innovating firms there coexist two basically different approaches. To so called neoclassical approach assumes maximising behaviour relating to an exogenously given innovation technology and the evolutionary approach postulates time constant routine decisions. Both explanations are supported by well known arguments. Nevertheless they seem to be completely separated in the literature. The evolutionary approach even defines itself by the separation of the neo-classical approach. In this paper the two methods or philosophies are linked in a simple duopolistic model. It will be shown, that the strategic maximising behaviour of innovating firms leads in a dynamic model to routine decisions as equilibrium strategies.