A computational model of economies of scale and market share instability
Source: Structural Change and Economic Dynamics
Vol.9, Issue 1, pp.55-83 ,
Published: 1998
Pages: Vol.9, Issue 1, pp.55-83
Author or Editor: Author
Replicator dynamics and computer simulation techniques are used to construct a reduced-form model which explores negative and positive feedback between the rate of a firm\'s cost reduction and its market share ('˜dynamic' returns to scale). Life-cycle phenomena are explored by combining positive and negative feedback in a firm\'s cost function. The objective of the model is to reproduce the patterns of concentration and instability found across a wide set of industries. Simulation results find that dynamic decreasing returns to scale produce instability and multiple equilibria in market shares, very different from the results generated from '˜static' decreasing returns to scale.
back
