An Agent Based Cournot Simulation with Innovation: Identifying the Determinants of Market Concentration
AbstractIn this paper, I develop a hybrid model that contains elements of both agent based simulations (ABS) as well as analytic Cournot models, to study the effects of firm characteristics, market characteristics, and innovation on market concentration, as measured by a Herfindahl-Hirschman Index (HHI). The model accommodates the following components: multiple firms with heterogeneous marginal costs, market entry and exit, barriers to entry, low or high cost industries, changing demand, varying levels of marginal cost reducing returns-to-innovation, varying costs associated with innovation, increased returns to innovation from past experience innovating, and varying propensities to innovate within the market. The components mentioned above are commonly cited as determinants of market concentration. A sensitivity analysis which is robust to high degrees of model complexity demonstrates that the model provides results that are consistent with economic theories of markets.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16539.
Date of creation: Jun 2009
Date of revision:
agent based simulation; Cournot; game; innovation; oligopoly;
Find related papers by JEL classification:
- C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-08 (All new papers)
- NEP-CMP-2009-08-08 (Computational Economics)
- NEP-COM-2009-08-08 (Industrial Competition)
- NEP-ENT-2009-08-08 (Entrepreneurship)
- NEP-INO-2009-08-08 (Innovation)
- NEP-TID-2009-08-08 (Technology & Industrial Dynamics)
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