A Model of Innovation and Knowledge Development Among Boundedly Rational Rival Firms

This model explores the consequences of common theoretical hypotheses and empirical stylized facts regarding innovation, knowledge development and knowledge management by geographically clustered rival firms. Our model artificially generates innovations, unknown and unexpected to our artificial decision-makers. Since the set of possibilities is not known a priori to our agents, they cannot apply utility maximization. Bounded rationality enters this model both as behavioural rules of thumb and as cognitive constraints on their application. In this paper, we merely illustrate the structure and the assumptions of our model