COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1786 Cost Innovation: Schumpeter and Equilibrium. Martin Shubik and William Sudderth March 2011 Modifying a parallel dynamic programming approach to a simple
deterministic economy, we consider the effect of an innovation in the means of production.
The success of the innovation is assumed to depend on the availability of financing, locus
of financial control, the amount of resources invested, and on a random event. The
relationship between money and physical assets is critical. In this first part stress is
laid on the innovation behavior of Robinson Crusoe in a premonetary economy, then on his
actions in a monetary economy in partial equilibrium. Part 2 considers the closed monetary
economy with several differentiated agents. |
