Heterogeneity and Increasing Returns May Drive Socio-Economic Transitions
There are clear benefits associated with a particular consumer choice for many current markets. For example, as we consider here, some products might carry environmental or `green' benefits. Some consumers might value these benefits while others do not. However, as evidenced by myriad failed attempts of environmental products to maintain even a niche market, such benefits do not necessarily outweigh the extra purchasing cost. The question we pose is, how can such an initially economically-disadvantaged green product evolve to hold the greater share of the market? We present a simple mathematical model for the dynamics of product competition in a heterogeneous consumer population. Our model preassigns a hierarchy to the products, which designates the consumer choice when prices are comparable, while prices are dynamically rescaled to reflect increasing returns to scale. Our approach allows us to model many scenarios of technology substitution and provides a method for generalizing market forces. With this model, we begin to forecast irreversible trends associated with consumer dynamics as well as policies that could be made to influence transitions
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.:
- René Kemp, 1998. "The Diffusion of Biological Waste-Water Treatment Plants in the Dutch Food and Beverage Industry," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(1), pages 113-136, July.
- Denis Phan & Mirta Gordon & J.-P. Nadal & J. Vannimenus, 2005.
"Multiple equilibria in a monopoly market with heterogeneous agents and externalities,"
- Jean-Pierre Nadal & Denis Phan & Mirta Gordon & Jean Vannimenus, 2005. "Multiple equilibria in a monopoly market with heterogeneous agents and externalities," Quantitative Finance, Taylor & Francis Journals, vol. 5(6), pages 557-568.
- Mirta Gordon & Jean-Pierre Nadal & Denis Phan & Jean Vannimenus, 2005.
"Sellers dilemna due to social interactions between customers,"
- Gordon, Mirta B. & Nadal, Jean-Pierre & Phan, Denis & Vannimenus, Jean, 2005. "Seller's dilemma due to social interactions between customers," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 356(2), pages 628-640.
- Weisbuch, Gerard & Kirman, Alan & Herreiner, Dorothea, 2000.
"Market Organisation and Trading Relationships,"
Royal Economic Society, vol. 110(463), pages 411-36, April.
- Weisbuch, Gerard, 2000. "Environment and institutions: a complex dynamical systems approach," Ecological Economics, Elsevier, vol. 35(3), pages 381-391, December.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:0706.1454. 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: (arXiv administrators)
If references are entirely missing, you can add them using this form.