Innovation Economics

The course covers economic aspects of technology, innovation, and industrial origanization, including theoretical and economic policy perspectives. The course presents equilibrium economics approaches to modeling and estimating technological progress, before turning to solutions beyond equilibrium economics. In particular, it discusses dynamical modeling of competition and technological change in replicator dynamics. Another focus of the course will be the economic theory of intellectual property rights, patents, and innovation incentives. Modern information economics and its peculiarities and their representation in economic models serve as an application at the end of the course: Why can open-source software be provided entirely without payment or any other compensation? Is using online social networks (Facebook, Linkedin, etc.) indeed free? Does software piracy and filesharing indeed cause damages to the music, film, and software sectors? Could artificial intelligence indeed completely replace human labour? And what would be the consequences of that?

Written examination, 60 minutes. The examination can be written in either English oder German. The questions will be available in both English and German.

1. Introduction

2. Estimation of technological progress in equilibrium models

3. Evolutionary (replikator dynamic) modeling of competition and technological change

4. Innovation, intellectual property, and patents

5. Economic models of the digital economy (software, internet, online social networks)

Arthur, W. B. (1989). Competing technologies, increasing returns, and lock-in by historical events. Economic Journal, 99(394):116–31.

Dosi, G. (1982). Technological paradigms and technological trajectories: A suggested interpretation of the determinants and directions of technical change. Research Policy, 11(3):147–162.

Elsner, W., Heinrich, T., and Schwardt, H. (2015). Microeconomics of Complex Economies: Evolutionary, Institutional, Neoclassical, and Complexity Perspectives. Academic Press, Amsterdam, NL, San Diego, CA, et al.

McNerney, J., Farmer, J. D., Redner, S., and Trancik, J. E. (2011). Role of design complexity in technology improvement. Proceedings of the National Academy of Sciences, 108(22):9008–9013.

Newman, M. (2018). Networks: An Introduction, Oxford University Press.

Saviotti, P. P. and Pyka, A. (2013). From necessities to imaginary worlds: Structural change, product quality and economic development. Technological Forecasting and Social Change, 80(8):1499–1512.

Scotchmer, S. (2004). Innovation and incentives. MIT press.

Shy, O. (2001). The Economics of Network Industries. Cambridge University Press, New York, NY, USA.

Silverberg, G. and Verspagen, B. (2005). A percolation model of innovation in complex technology spaces. Journal of Economic Dynamics and Control, 29(1-2):225–244.