Open AccessAre Incremental Innovations A Suboptimal Outcome? The Role of Uncertainty and Loss Aversion
Author(s) -
Daniela Grieco
Publication year - 2022
Publication title -
scholars journal of economics, business and management/scholars journal of economics, business amd management
Language(s) - English
Resource type - Journals
eISSN - 2348-8875
pISSN - 2348-5302
DOI - 10.36347/sjebm.2022.v09i02.001
Subject(s) - outcome (game theory) , status quo , loss aversion , preference , economics , status quo bias , microeconomics , competition (biology) , welfare , market economy , ecology , biology
Incremental innovations appears to be much more frequent than radical innovations. Possible explanations rely on the effect of the degree of competition in the market. The paper, on the contrary, focuses on agents' attitude towards status quo and con- servativeness and specifies the conditions where the preference for incremental innovations represents an optimum. In fact, the welfare generated by radical innovations drops dramatically when agents are uncertainty-averse and/or loss-averse.