Title : Expectations and Adaptive Behaviours: the Missing Trade-off in Models of Innovation
Author(s) : Vanessa Oltra, Murat Yildizoglu
Abstract : We explore the modelling of the determination of the level of R&D investment of firms. This means that we do not tackle the decision of being an innovator or not, nor the adoption of a new technology. We exclude these decisions and focus on the situations where firms invest in internal R&D in order to produce an innovation. In that case the problem is to determine the level of R&D investment. Our interest is to analyse how expectation and adaptation can be combined in the modelling of R&D investment rules. In the literature both dimensions are generally split up: rational expectations are assumed in neoclassical models whereas alternative approaches (institutional and/or evolutionary) generally adopt a purely adaptive representation.
Key-words : Bounded rationality, learning, expectations, innovation dynamics.
JEL Classification : NA