Micro-Level Adaptation, Macro-Level Selection, and the Dynamics of Market Partitioning.

ABSTRACT: This paper provides a micro-foundation for dual market structure formation through partitioning processes in marketplaces by developing a computational model of interacting economic agents. We propose an agent-based modeling approach, where firms are adaptive and profit-seeking agents entering into and exiting from the market according to their (lack of) profitability. Our firms are characterized by large and small sunk costs, respectively. They locate their offerings along a unimodal demand distribution over a one-dimensional product variety, with the distribution peak constituting the center and the tails standing for the peripheries. We found that large firms may first advance toward the most abundant demand spot, the market center, and release peripheral positions as predicted by extan

SUBMITTER: Garcia-Diaz C 

PROVIDER: S-EPMC4687648 | biostudies-literature | 2015

REPOSITORIES: biostudies-literature