Network Models of Innovation and Knowledge Diffusion

Abstract

Abstract Much of modern microeconomics is built from the starting point of the perfectly competitive market. In this model, there are an infinite number of agents - buyers and sellers, none of whom has the power to influence the price by his actions. The good is well defined, indeed it is perfectly standardized. And any interactions agents have is mediated by the market. That is, all transactions are anonymous, in the sense that the identities of buyer and seller are unimportant. Effectively, the seller sells ‘to the market ‘ and the buyer buys ‘from the market ‘. This follows from the standardization of the good, and the fact that the market imposes a very strong discipline on prices. Implicit here is one (or both) of two assumptions.