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Evolutionary Model of Non-Durable Markets

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  • Kaldasch, Joachim

Abstract

Presented is an evolutionary model of consumer non-durable markets, which is an extension of a previously published paper on consumer durables. The model suggests that the repurchase process is governed by preferential growth. Applying statistical methods it can be shown that in a competitive market the mean price declines according to an exponential law towards a natural price, while the corresponding price distribution is approximately given by a Laplace distribution for independent price decisions of the manufacturers. The sales of individual brands are determined by a replicator dynamics. As a consequence the size distribution of business units is a lognormal distribution, while the growth rates are also given by a Laplace distribution. Moreover products with a higher fitness replace those with a lower fitness according to a logistic law. Most remarkable is the prediction that the price distribution becomes unstable at market clearing, which is in striking difference to the Walrasian picture in standard microeconomics. The reason for this statement is that competition between products exists only if there is an excess supply, causing a decreasing mean price. When, for example by significant events, demand increases or is equal to supply, competition breaks down and the price exhibits a jump. When this supply shortage is accompanied with an arbitrage for traders, it may even evolve into a speculative bubble. Neglecting the impact of speculation here, the evolutionary model can be linked to a stochastic jump-diffusion model. --

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Bibliographic Info

Paper provided by ZBW - German National Library of Economics in its series EconStor Preprints with number 50531.

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Date of creation: 2011
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Handle: RePEc:zbw:esprep:50531

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Related research

Keywords: non-durables; evolutionary economics; economic growth; price distribution; Laplace distribution; replicator dynamics; firm growth; jump-diffusion model;

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References

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  1. Kaldasch, Joachim, 2011. "The Product Life Cycle of Durable Goods," EconStor Preprints 50530, ZBW - German National Library of Economics.
  2. Giulio Bottazzi & Sandro Sapio & Angelo Secchi, 2004. "Some Statistical Investigations on the Nature and Dynamics of Electricity Prices," LEM Papers Series 2004/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  3. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, vol. 5(2), pages 177-188, November.
  4. Kaldasch, Joachim, 2011. "Evolutionary model of an anonymous consumer durable market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(14), pages 2692-2715.
  5. Vasicek, Oldrich Alfonso, 1977. "Abstract: An Equilibrium Characterization of the Term Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(04), pages 627-627, November.
  6. Joachim Kaldasch, 2011. "The Experience Curve and the Market Size of Competitive Consumer Durable Markets," EconStor Preprints 59749, ZBW - German National Library of Economics.
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Cited by:
  1. Joachim Kaldasch, 2012. "Evolutionary Model of the Personal Income Distribution," Papers 1203.6507, arXiv.org.
  2. Joachim Kaldasch, 2012. "Evolutionary Model of the Growth and Size of Firms," Papers 1208.1123, arXiv.org.

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