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Exploitation versus Exploration in Market Competition

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  • John Debenham
  • Ian Wilkinson

Abstract

A general simulation model of market competition is developed to explore the effectiveness of and interactions between different types of product exploration and exploitation strategies, that is, innovation, imitation and process improvement. The model, like real markets, is highly non-linear such that analytical solutions are not possible. We use simulation experiments to examine firm survival and the effectiveness of different strategies under different market conditions including competitors' strategies, how long it takes for each strategy to bear fruit and how costly it is, and the timing, growth and duration of product life cycles. The model is implemented on the Internet and provides the basis for further experiments to examine the impact of different combinations of firm strategies on survival and performance.

Suggested Citation

  • John Debenham & Ian Wilkinson, 2006. "Exploitation versus Exploration in Market Competition," Industry and Innovation, Taylor & Francis Journals, vol. 13(3), pages 263-289.
    • Handle: RePEc:taf:indinn:v:13:y:2006:i:3:p:263-289
    DOI: 10.1080/13662710600858761
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    References listed on IDEAS

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    1. Tesfatsion, Leigh S., 2002. "Agent-Based Computational Economics: Growing Economies from the Bottom Up," Staff General Research Papers Archive 5075, Iowa State University, Department of Economics.
    2. Giulio Bottazzi & Giovanni Dosi & Marco Lippi & Fabio Pammolli & Massimo Riccaboni, 2000. "Processes of corporate growth in the evolution of an innovation-driven industry. The case of pharmaceuticals," LEM Papers Series 2000/05, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
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    Cited by:

    1. Sreejith Kumar Krishnakumar & Rajiv Kishore & Nallan C. Suresh, 2022. "Expansive or focused attention? An exploration–exploitation perspective on e‐Business systems and firm performance," Production and Operations Management, Production and Operations Management Society, vol. 31(5), pages 2038-2066, May.

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