Market dimensionality and the proliferation of small-scale firms

Authored by Cesar Garcia-Diaz, Arjen Van Witteloostuijn, Gabor Peli

Date Published: 2008-04

DOI: 10.1142/s0219525908001593

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

We build an agent-based computational model to study how the changing number of active product variants in a two-dimensional product space affects the performance of different firm types (i.e. large-scale and small-scale enterprises). We use an alternative approach to measure product space dimensionality, considering that dimensions may be a fraction of the Euclidean measure. The results confirm that high dimensionality gives advantage to small-scale firms. Additionally, we find that large-scale firms may also benefit from initial increasing dimensionality, since it allows a small degree of product differentiation and price discrimination.

Tags

Agent-based modeling market evolution market dimensionality