Durability of consumption goods and market competition: an agent-based modelling
AbstractThis paper presents an agent-based simulation model that explores the dynamics of product lifetimes on a competitive market. The main objective of this modelling exercise is to investigate the conditions under which product-life extension strategies can be effective. In this model, change in products’ characteristics is driven by an endogenous stochastic process relying on the interplays between heterogeneous consumers and firms. The main contribution of the paper is to present a detailed modeling of demand which enables to analyze more thoroughly how decisions of bounded rational consumers impact on the dynamics of the system and, more particularly, how purchase process shapes market selection and strategies of firms. While most existing literature on product lifetime investigates durable goods monopolists, our study highlights that competition and diversity matter. The coexistence of competing products with different lifetimes can encourage firms to market long lifetime products. Our results also stress the critical role played in market dynamics by the processes driving purchase decision. The purchasing behavior of consumers in itself will greatly guide firms’ strategies and in fine shape market structure.
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Bibliographic InfoPaper provided by Groupe de Recherche en Economie Théorique et Appliquée in its series Cahiers du GREThA with number 2011-31.
Date of creation: 2011
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industrial dynamics; obsolescence; product durability; product lifetimes; simulation model; sustainable consumption;
Find related papers by JEL classification:
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-09 (All new papers)
- NEP-CMP-2011-10-09 (Computational Economics)
- NEP-COM-2011-10-09 (Industrial Competition)
- NEP-MKT-2011-10-09 (Marketing)
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