Diversity in Schumpeterian games

TL;DR

This paper models Schumpeterian competition as a population game to analyze how diversity introduced by new products influences economic evolution and innovation dynamics.

Contribution

It introduces a novel population game model of Schumpeterian competition that captures the role of diversity in driving innovation and creative destruction.

Findings

Diversity change acts as a key driver of innovation.

The Schumpeterian state can evolve based on product properties.

Diversity influences the process of creative destruction.

Abstract

We examine the impact of a change in diversity introduced by a new product on the evolution of an economic system. Modeling Schumpeterian competition as a population game with a unique, attracting, evolutionarily stable state (the Schumpeterian state), in which both innovators and imitators coexist, we examine how the Schumpeterian state evolves depending on the properties of the new product developed by innovators. This way, we demonstrate that the change in diversity is one of the spiritus movens of innovation, influencing the process of creative destruction.