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Firm routines, customer switching and market selection under duopoly

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Author Info

  • Martin Currie

    (School of Economic Studies and ESRC Centre for Research on Innovation and Competition, Victoria University of Manchester, Manchester M13 9PL, UK)

  • Stan Metcalfe

    (School of Economic Studies and ESRC Centre for Research on Innovation and Competition, Victoria University of Manchester, Manchester M13 9PL, UK)

Abstract

This paper explores the dynamics of market selection for an industry in which firms employ relatively simple pricing, production and investment routines and in which consumers switch between rival firms in response to price differentials but do not all do so instantaneously. The key issue is whether market processes result in the elimination of less efficient firms by their more efficient rivals. That is to say, do such processes unfailingly increase the efficiency with which available economic resources are used? In the context of duopoly, we show that the survival of the more efficient firm is not guaranteed and that, more generally, the outcome depends upon the speeds with which firms adjust prices and capacities and with which customers switch between rival firms.

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Bibliographic Info

Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 11 (2001)
Issue (Month): 4 ()
Pages: 433-456

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Handle: RePEc:spr:joevec:v:11:y:2001:i:4:p:433-456

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Related research

Keywords: Non-linear dynamics - Firm adjustment routines - Market selection;

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Cited by:
  1. Harrington, Joseph Jr. & Chang, Myong-Hun, 2005. "Co-evolution of firms and consumers and the implications for market dominance," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 245-276, January.
  2. Francesco Saraceno & Jason Barr, 2004. "Cournot Competition and Endogenous Firm Size," Computing in Economics and Finance 2004 129, Society for Computational Economics.
  3. Werner Hölzl, 2012. "Mobility Barriers and the Speed of Market Selection," WIFO Working Papers 437, WIFO.

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