Publication Date: March 2011
Revision Date: August 2011
Modifying a parallel dynamic programming approach to a simple deterministic economy, we consider the eﬀect of an innovation in the means of production. The success of the innovation is assumed to depend on the availability of ﬁnancing, locus of ﬁnancial control, the amount of resources invested, and on a random event. The relationship between money and physical assets is critical. In this ﬁrst part stress is laid on the innovation behavior of Robinson Crusoe in a premonetary economy, then on his actions in a monetary economy in partial equilibrium. Part 2 considers the closed monetary economy with several diﬀerentiated agents.
Cost innovation, Schumpeter, Circular flow, Strategic market games
JEL Classification Codes: C73, D24, G32