Bridging the Gap between Schumpeterian Competition and Evolutionary Game Theory

This paper suggests that the analysis of Schumpeterian competitionwithin the Nelson--Winter model should be complemented with evolutionary game theory. This model and its limitations for density-dependent Schumpeterian strategies are presented in terms of the equations of evolutionary dynamics. Formulated as evolutionary games, the set of strategies can easily be extended from innovators and imitators to routinists, complementors, and mixers. All strategies are presented in relation to a modified version of the Hawk-Dove Game. In this setting, the possibility of coexistence of several Schumpeterian strategies is proved. This is an example of Schumpeterian competition within evolutionary game theory. JEL codes: O12, -, Bridging the gap between Schumpeterian competition and evolutionary game theory Version: 2007-02-28, 18:46 This paper suggests that the relatively concrete analysis of Schumpeterian competition in terms of the Nelson–Winter model should be complemented with evolutionary game theory. To prepare for this complement, the Nelson–Winter model is presented in terms of the equations of evolutionary dynamics that are important within evolutionary game theory. Thereby it is demonstrated that the model as serious limitations with respect to the study of the density-dependent success of Schumpeterian strategies. Furthermore, the set of analysed strategies has been limited. When Schumpeterian competition is defined in terms of evolutionary games, the set of strategies can easily be extended from including only innovators and imitators to the additional coverage of routinists, complementors, and mixers. All strategies are presented in relation to a modified version of John Maynard Smith’s Hawk–Dove Game. In this setting, the possibility of coexistence of several of these Schumpeterian strategies is proved. This analysis is presented as an example of the way evolutionary game theory might complement the Nelson–Winter model.