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Discussion Paper Details

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Title: Learning-by-Doing, Organizational Forgetting and Industry Dynamics

Author(s): David Besanko, Ulrich Doraszelski, Yaroslav Kryukov and Mark Satterthwaite

Publication Date: March 2007

Keyword(s): dynamic games, learning-by-doing and organizational forgetting

Programme Area(s): Industrial Organization

Abstract: Learning-by-doing and organizational forgetting have been shown to be important in a variety of industrial settings. This paper provides a general model of dynamic competition that accounts for these economic fundamentals and shows how they shape industry structure and dynamics. Previously obtained results regarding the dominance properties of firms' pricing behaviour no longer hold in this more general setting. We show that organizational forgetting does not simply negate learning-by-doing. Rather, learning-by-doing and organizational forgetting are distinct economic forces. In particular, a model with both learning-by-doing and organizational forgetting can give rise to aggressive pricing behaviour, market dominance, and multiple equilibria, whereas a model with learning-by-doing alone cannot.

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Bibliographic Reference

Besanko, D, Doraszelski, U, Kryukov, Y and Satterthwaite, M. 2007. 'Learning-by-Doing, Organizational Forgetting and Industry Dynamics'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6160