Modeling innovation
Suppose you help run the R&D unit of a major technology company. To encourage innovation, you might have the unit run a kind of internal race, letting a wide variety of projects unfold on their own. That seems like an enlightened approach, given the difficulty of knowing exactly which ones will pan out — and yet you might actually be discouraging the unit’s overall productivity, according to MIT Associate Professor Alessandro Bonatti. Bonatti is an economist at the MIT Sloan School of Management whose work models the behavior of firms, employees, and market prices. Across this wide range of topics, Bonatti deploys game theory, the formal study of competition and cooperation, to draw some surprising conclusions. Consider the R&D scenario. Individual researchers want to press ahead on their own projects, knowing they will benefit by making advances more quickly than their co-workers. But a useful final product for a firm — in...