Non-Price Competition in a Modular Economy
While it has been well acknowledged by economists for a long time that competition is not just about price, the conventional quantity-based economic models have difficulties integrating price competition and quality competition into a coherent framework. In this paper, motivated by Herbert Simon’s view of near decomposability or modularity, we propose a quality-based economic model called the modular economy. In this modular economy, quality is manifested by the evolutionary design of more sophisticated and customized products that can satisfy consumers’ satisfaction to a higher degree. Two essential features of the modular economy are founded through the agent-based simulation of a duopolistic competition. First, market competition tends to be self-annihilating; the competition will eventually end up with a dominant or a monopoly firm (conglomerate). Second, the high-markup firm has a better chance to be the only survivor than its low-markup competitor. We analyze these features through the complex cyclical dynamics of prices, profits, dividends, investment, working capital, and quality.
|Date of creation:||2014|
|Contact details of provider:|| Postal: Via Inama 5, 38100 Trento|
Web page: http://www.assru.economia.unitn.it/index.html
More information through EDIRC
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.:
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716.
- M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters, in: Regional Climate Change and Variability, chapter 1 Edward Elgar Publishing.
- Bin-Tzong Chie & Shu-Heng Chen, 2003. "A Functional-Modularity Approach to Preferences," Computing in Economics and Finance 2003 107, Society for Computational Economics.
- Ken Binmore & Larry Samuelson, 1999. "Evolutionary Drift and Equilibrium Selection," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 363-393.
When requesting a correction, please mention this item's handle: RePEc:trn:utwpas:1401. 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: (firstname.lastname@example.org)
If references are entirely missing, you can add them using this form.