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Striving for balance: past choices and future expectations in a critical resource competition dynamic model

Author

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  • Gianluca Biggi

    (Sant’Anna School of Advanced Studies)

  • Andrea Caravaggio

    (University of Siena)

Abstract

This study investigates market dynamics where a firm’s output and market share are influenced by its ability to acquire and effectively utilize technological resources. The proposed model integrates historical decision-making with strategic responses to competitors, focusing on how firms choose to acquire a critical resource. The analysis considers two decision-making mechanisms: one where the firm’s inertia remains constant over time and another where inertia varies based on the information available about current decisions made by both the firm and its rivals. The findings highlight scenarios where market behavior becomes complex and chaotic, with irregular fluctuations in resource acquisition choices and high sensitivity to initial market conditions. Furthermore, the study shows that an endogenous decision-making mechanism—where the firm’s inertia adjusts in response to its rivals’ strategies—can help reduce, or even reverse, disparities in market leadership. Finally, the interaction between two firms capable of adapting their decision-making based on performance leads to markedly different market dynamics compared to scenarios where such flexibility is absent.

Suggested Citation

  • Gianluca Biggi & Andrea Caravaggio, 2025. "Striving for balance: past choices and future expectations in a critical resource competition dynamic model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 20(3), pages 701-723, July.
    • Handle: RePEc:spr:jeicoo:v:20:y:2025:i:3:d:10.1007_s11403-024-00429-9
    DOI: 10.1007/s11403-024-00429-9
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    References listed on IDEAS

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    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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