FIRM AND INDUSTRY RESPONSE TO CHANGED MARKET CONDITIONS: AN EVOLUTIONARY APPROACH |
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| Authors: | RICHARD R NELSON SIDNEY G WINTER |
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| Institution: | *Professors of Economics, Yale University. We are indebted to Richard Levin, Jack Hirshleifer, John Quigley and the referee for very helpful comments. |
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| Abstract: | This paper describes an evolutionary theory of the response of firms in a competitive industry to changed market conditions. Search and selection replace the more orthodox assumptions of profit maximizing and zero profit long run equilibrium. The particular assumptions needed to assure that the direction of response of such an evolutionary system is the same as that predicted by more orthodox theory are explored. While an evolutionary theory and a more orthodox one yield many of the same positive qualitative predictions, they differ sharply in a number of other respects, and these are considered in detail. |
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