Each period a new technology's quality climbs an S-curve while the incumbent's old product stays roughly flat. A firm's share of a demand segment (old or new) is proportional to the R&D capability it has built up there. The entrant always commits 100% of its (smaller) R&D budget to the new technology — it has no existing revenue to protect. The incumbent would rationally shift its much larger budget toward the new tech too, but cannibalization reluctance shrinks that shift: it keeps defending the old, highly profitable line instead.
rational share = Qnew / (Qnew + Qold)
incumbent → new tech = rational share × (1 − reluctance)
entrant → new tech = 100%, always
capability += investment (diminishing returns) − decay
firm share = Σ demand_segment × (own capability / total capability)
- Cannibalization reluctance — even a small value compounds: every period the incumbent under-invests, the entrant's head start in new-tech capability widens, until the entrant's segment share overtakes the incumbent's — despite the incumbent's much larger total resources.
- Sim speed — how many simulated periods (quarters) tick per second.
- At reluctance ≈ 0 the incumbent invests almost as aggressively as the entrant and, thanks to its size, tends to hold on. Push the slider up and watch how little reluctance it takes to flip the long-run outcome.