Consumer social learning and industrial dynamics
Authored by Carlos M Fernandez-Marquez, Francisco Fatas-Villafranca, Francisco J Vazquez
Date Published: 2019
DOI: 10.1080/10438599.2018.1433582
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Platforms:
Repast
Java
Model Documentation:
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Mathematical description
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Abstract
In this paper, we propose an agent-based model in which industrial
dynamics depend on consumer social learning and firm innovation efforts.
We draw on behavioral economics and consumer psychology to model
consumer learning as a process of social adaptation-cum-individual
novelties which operates within a stochastic dynamic network. In our
model, consumers create original patterns of behavior, but they also
imitate similar others through a (degree-dependent) influence-biased
process of change. Likewise, consumer behavior is shaped by firms which
attempt to capture larger market shares. Thus, we propose a model in
which consumers update their position (tastes) in a product
characteristics space through innovation and adaptation, and co-evolve
with profit-seeking firms which observe and shape evolving consumer
behavior. We simulate the resulting market process obtaining
trajectories and stationary states for the degree of industrial
concentration, the number of producers, and certain features of the
industry lifecycle.
The analysis of the model reveals how three demand parameters - consumer
`insistence' (capturing inertia in decision-making), the `locality' of
consumer learning, and consumer `loyalty' to firms - affect industry
evolution. Likewise, the model generates a continuum of limit industrial
structures - from perfect competition, to oligopolies or monopolies -
with said demand parameters influencing the stationary states.
Tags
Agent-based models
Innovation
Evolutionary economics
Economics
Model
preferences
rationality
Psychology
Demand
Industrial dynamics
Consumer learning