Learning-by-doing, organizational forgetting, and industry dynamics

David Besanko*, Ulrich Doraszelski, Yaroslav Kryukov, Mark Satterthwaite

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

90 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)453-508
Number of pages56
JournalEconometrica
Volume78
Issue number2
DOIs
StatePublished - Mar 2010

Keywords

  • Dynamic stochastic games
  • Industry dynamics
  • Learning-by-doing
  • Markov-perfect equilibrium
  • Multiple equilibria
  • Organizational forgetting

ASJC Scopus subject areas

  • Economics and Econometrics

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