Generalized urn schemes and technological dynamics

Abstract

Adaptive (path dependent) processes of growth modeled through urn schemes find important applications to economic dynamics (and also to other disciplines, such as biology, physics, chemistry). The paper presents some further properties of generalized urn schemes and studies dynamic stochastic processes characterized by both positive and, possibly, negative feedbacks of a functional form as ‘badly behaved’ as possible. Two applicantions to technological diffusion are considered. One of the models tackles the case when there is a separation within the pool of adopters which can be interpreted as the outcome of adaptive learning on the features of the new technologies by imperfectly informed agents. Other examples deal with dependence of final market shares of two technologies on the pricing policies of the firms which produce them. The stochasticity of the processes is caused by some mixed strategies used by the adopters or/and imperfectness of the information which they possess.