Are Incremental Innovations A Suboptimal Outcome? The Role of Uncertainty and Loss Aversion

Incremental innovations appears to be much more frequent than radical innovations. Possible explanations rely on the effect of degree competition in market. The paper, contrary, focuses agents' attitude towards status quo and con- servativeness specifies conditions where preference for incremental represents an optimum. In fact, welfare generated by drops dramatically when agents are uncertainty-averse and/or loss-averse.