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Endogenous local interaction and multi-product firms

Author

Listed:
  • Bauke Visser

    () (Shell Services International BV, Postbox 162, NL-2501 AN The Hague, The Netherlands)

Abstract

Multi-product firms are modelled as locally interacting entities that gather information on the profitability of product combinations in an environment defined in terms of their currently supplied markets. They learn from their own past play. Local information gathering may slow down convergence and may prohibit profit rates from becoming equal. Cycles show parts of the economy that are in rest, while others remain in a state of flux. The first two results stem from the endogeneity of the interaction structure, while the third follows from the interplay of learning and information gathering.

Suggested Citation

  • Bauke Visser, 1999. "Endogenous local interaction and multi-product firms," Journal of Evolutionary Economics, Springer, vol. 9(2), pages 243-263.
  • Handle: RePEc:spr:joevec:v:9:y:1999:i:2:p:243-263
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    References listed on IDEAS

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    1. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-459, March.
    2. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-1071, September.
    3. Avner Shaked & John Sutton, 1990. "Multiproduct Firms and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 45-62, Spring.
    4. Blume Lawrence E., 1993. "The Statistical Mechanics of Strategic Interaction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 387-424, July.
    5. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 612-643, August.
    6. Wolinsky, Asher, 1986. "The Nature of Competition and the Scope of Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 247-259, March.
    7. Jovanovic, B., 1993. "The Diversification of Production," Working Papers 93-11, C.V. Starr Center for Applied Economics, New York University.
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    Cited by:

    1. Otto H. Swank & Bauke Visser, 2015. "Learning from Others? Decision Rights, Strategic Communication, and Reputational Concerns," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 109-149, November.

    More about this item

    Keywords

    Multi-product firms ; Diversification ; Information gathering ; Learning;

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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