Adaptive dynamics and technological change

This paper is about the emergence of technological variety arising from market interaction and technological innovation. Existing products in the market compete with innovative ones resulting in a slow and continuous evolution of the underlying technological characteristics of successful products. When technological evolution reaches an equilibrium, it can either be an evolutionarily stable strategy (ESS), where marginally innovative products do not penetrate the market, or a branching point, where new products coexist along with established ones. Thus, technological branching can give rise to product variety. In the paper we first introduce adaptive dynamics (AD), a recently proposed theory of evolutionary processes, aiming at modeling various features of technological change. By separating the timescale typical of market competition processes from that on which marginal innovations drive technological change, AD formally describes products coevolution by means of ordinary differential equations. Then, a first application of AD in economics is presented and discussed in detail. The problem we discuss is intentionally very simple, in order to clearly exemplify all the steps of the analysis, but allows to draw the following intuitive conclusion: product variety is expected in market sectors characterized by a wide capacity to absorb different technologies and by competition-safe niches even or relatively similar products. The limitations of the AD approach, as well as some promising further applications in economics and social sciences, are briefly discussed at the concluding section.
KEYWORDS: Adaptive dynamics; Market dynamics; Innovation dynamics; Characteristic trait; Technological branching; Product variety

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