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

Lapatinas, Athanasios and Garas, Antonios (2016): The role of networks in firms’ multi-characteristics competition and market-share inequality.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: location choice, networks, multi-characteristics space, networks; consumer behavior; decision heuristics; agent-based model
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C65 - Miscellaneous Mathematical Tools; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships ; Contracts and Reputation ; Networks; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R39 - Other

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