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Learning-by-doing and organizational forgetting are empirically important in a variety of industrial settings. This paper provides a general model of dynamic competition that accounts for these fundamentals and shows how they shape industry structure and dynamics. We show that forgetting does not simply negate learning. Rather, they are distinct economic forces that interact in subtle ways to produce a great variety of pricing behaviors and industry dynamics. In particular, a model with learning and forgetting can give rise to aggressive pricing behavior, varying degrees of long-run industry concentration ranging from moderate leadership to absolute dominance, and multiple equilibria.
This is the peer reviewed version of the following article: David Besanko, Ulrich Doraszelski, Yaroslav Kryukov, Mark Satterthwaite (2010), Learning-by-Doing, Organizational Forgetting, and Industry Dynamics, Econometrica, 78 (2), 453 - 508, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.3982/ECTA6994/abstract. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving [link to http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms].
dynamic stochastic games, Markov-perfect equilibrium, learning-by-doing, organizational forgetting, industry dynamics, multiple equilibria
Besanko, D., Doraszelski, U., Kryukov, Y., & Satterthwaite, M. (2010). Learning-by-Doing, Organizational Forgetting, and Industry Dynamics. Econometrica, 78 (2), 453-508. http://dx.doi.org/10.3982/ECTA6994
Date Posted: 27 November 2017
This document has been peer reviewed.