Agent-based modeling on economic dynamics—Why competing automakers coexist in Japan?

In Japan, there exist many major companies that manufacture automobiles. Although they are competing, they coexist until now. Some economic researchers have suggested several causes for this coexistence. Examples are the protectionism by government and the cooperative relationship between maker and sub-suppliers. These factors may indeed strengthen the respective firms, but they may not be sufficient to explain the coexistence of the carmakers. In the present paper, we apply an agent-based model to explore the reasons why Japanese carmakers can coexist. The dynamics of corporate profits are found to be described by the competitive Lotka-Volterra equations that are very popular in ecology. While the coexistence of competing biospecies is very hard for Lotka-Volterra equations, the competing carmakers can survive. The coexistence of makers may come from two causes. One is “intraspecific competition”: people tend to avoid designs of the same manufacturer. Intraspecific competition is rarely seen in ecosystems but it is commonly observed in business societies. The other is the unique economic situation that is pointed out by economic researchers: all Japanese makers are supported by governmental protectionism and each maker has a cooperative relationship with sub-suppliers.