Sunday, 20 July 2008

From "Increasing returns and path dependence in the economy"

By Brian W. Arthur.

[...] Adoption of technologies that compete can be usefully modelled as a nonlinear Polya process. A unit increment -- an individual adoption -- is added, each time of choice, to a given technology with a probability that depends on the numbers (or proportions) holding each technology at that particular time. We can use our strong-law theorems to show circumstances under which increasing returns to adoption (the probability of adoption rises with the share of the market) may drive the adopter "market" to a single dominant technology, with small events early or "selecting" the technology that takes over [...]

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