On positional consumption and technological innovation: an agent-based model

Authored by Tanya Araujo, Joao P. R. Bernardino

Date Published: 2013-11

DOI: 10.1007/s00191-013-0317-5

Sponsors: Portuguese Foundation for Science and Technology (FCT)

Platforms: MATLAB

Model Documentation: Other Narrative Flow charts Mathematical description

Model Code URLs: Model code not found

Abstract

Positional behaviour is arguably a source of social externalities. Remedies for this market failure are defended by some authors and rejected by others. One of the issues discussed is the role that the competition for positional goods may have in generating technological innovation. This article aims to contribute to the understanding of the dynamics of this process through the use of an agent-based model. Simulations show a plausible dynamics of the process of technological innovation as generated by consumption of positional nature. An interpretation of the results in the scope of the policy discussion in question is provided. The influence of key factors such as income inequality, the materialization of the Hirsch conjecture, and characteristics of the network of relative preferences, is analised. We also frame the potential interest of positional consumption and this model in particular in the context of the ongoing discussion among evolutionary economists on the behaviour of demand.

Tags

Agent-based modelling Innovation Evolutionary economics Demand behaviour Economic inequality Hirsch conjecture Positional consumption Relative preferences Social network effects