Advanced Search
MyIDEAS: Login

How much can firms know?

Contents:

Author Info

  • Bridget Rosewell
  • Paul Ormerod

Abstract

There are two key stylised facts about the extinction patterns of firms. First, the probability of extinction is highest at the start of the firm"s existence, but soon becomes more or less invariant to the age of the firm. Second, the relationship between the size and frequency of firm extinctions is closely approximated by a power law. An agent based model of firm evolution and extinction has been developed which has properties which conform closely to the stylised facts. We examine the effects of allowing firms different amounts of knowledge about the effects of strategy in the context of this agent-based evolutionary model. There are very considerable returns in the model to acquiring knowledge. As both the amount of knowledge available to firms increases and as the number of firms capable of acquiring such knowledge rises, the lifespan of agents approaches the full information paradigm in which agents live for ever. However, even with relatively low levels of knowledge and numbers of agents capable of acquiring it, the model ceases to have properties which are compatible with the two key stylised facts on firm extinctions. The clear implication is that firms have very limited capacities to acquire knowledge about the true impact of their strategies.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://repec.org/sce2004/up.28483.1076498136.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 44.

as in new window
Length:
Date of creation: 11 Aug 2004
Date of revision:
Handle: RePEc:sce:scecf4:44

Contact details of provider:
Email:
Web page: http://comp-econ.org/
More information through EDIRC

Related research

Keywords: agent based evolutionary model; heterogenous agents; learning;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Vickers, John, 1995. "Concepts of Competition," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 1-23, January.
  2. L. A. N. Amaral & S. V. Buldyrev & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: I. Empirical results for company growth," Papers cond-mat/9702082, arXiv.org.
  3. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  4. Cook, William & Ormerod, Paul, 2003. "Power law distribution of the frequency of demises of US firms," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 207-212.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Rational short-termism
    by chris dillow in Stumbling and Mumbling on 2013-03-06 14:23:55

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:sce:scecf4:44. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.