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The role of networks in firms’ multi-characteristics competition and market-share inequality

Author

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  • Lapatinas, Athanasios
  • Garas, Antonios

Abstract

We develop a location analysis spatial model of firms’ competition in multi-characteristics space, where consumers’ opinions about the firms’ products are distributed on multilayered networks. Firms do not compete on price but only on location upon the products’ multi-characteristics space, and they aim to attract the maximum number of consumers. Boundedly rational consumers have distinct ideal points/tastes over the possible available firm locations but, crucially, they are affected by the opinions of their neighbors. Our central argument is that the consolidation of a dense underlying consumers’ opinion network is the key for the firm to enlarge its market-share. Proposing a dynamic agent-based analysis on firms’ location choice we characterize multi-dimensional product differentiation competition as adaptive learning by firms’ managers and we argue that such a complex systems approach advances the analysis in alternative ways, beyond game-theoretic calculations.

Suggested Citation

  • Lapatinas, Athanasios & Garas, Antonios, 2016. "The role of networks in firms’ multi-characteristics competition and market-share inequality," MPRA Paper 68959, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:68959
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    File URL: https://mpra.ub.uni-muenchen.de/80566/8/MPRA_paper_80566.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    location choice; networks; multi-characteristics space; networks; consumer behavior; decision heuristics; agent-based model;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other

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