Learning from Own and Foreign Experience: Technological Adaptation by Imitating Firms

In this paper we study the adaptive behavior of rms which repeatedly have to make strategic production decisions. In a single good market the rms use own experience as well as information gathered by observing competitors to iteratively choose a technology out of a given set. The adaptive learning of the rms is analyzed in a dynamic model formally resembling the so called 'Ant System'. In several simulations we show that a small but positive propensity to imitate is optimal for the rms yielding production eeciencies above 95% of the maximal value. Furthermore, we observe that in a competitive situation rms using optimal propensities to imitate outmatch pure imitators and non-imitators as well in production eeciency as in proots.