Outflow Dynamics in Modeling Oligopoly Markets: The Case of the Mobile Telecommunications Market in Poland

Sznajd-Weron, Katarzyna and Weron, Rafal and Wloszczowska, Maja (2008): Outflow Dynamics in Modeling Oligopoly Markets: The Case of the Mobile Telecommunications Market in Poland.

Abstract

In this paper we introduce two models of opinion dynamics in oligopoly markets and apply them to a situation, where a new entrant challenges two incumbents of the same size. The models differ in the way the two forces influencing consumer choice - (local) social interactions and (global) advertising - interact. We study the general behavior of the models using the Mean Field Approach and Monte Carlo simulations and calibrate the models to data from the Polish telecommunications market. For one of the models criticality is observed - below a certain critical level of advertising the market approaches a lock-in situation, where one market leader dominates the market and all other brands disappear. Interestingly, for both models the best fits to real data are obtained for conformity level 0.3<p<0.4. This agrees very well with the conformity level found by Solomon Asch in his famous social experiment.

• Item Type: MPRA Paper
• Language: English
• Keywords: opinion dynamics, outflow dynamics, agent-based model, oligopoly market, advertising, mobile telephony
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D70 - General; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M37 - Advertising; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General

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