Thursday, July 31, 2014

Non-Price Competition in a Modular Economy

Bin-Tzong Chie, Tamkang University and Shu-Heng Chen, National Chengchi University address Non-Price Competition in a Modular Economy.

ABSTRACT: While it has been well acknowledged by economists for a long time that competition is not just about price, the conventional quantity-based economic models have difficulties integrating price competition and quality competition into a coherent framework. In this paper, motivated by Herbert Simon’s view of near decomposability or modularity, we propose a quality-based economic model called the modular economy. In this modular economy, quality is manifested by the evolutionary design of more sophisticated and customized products that can satisfy consumers’ satisfaction to a higher degree. Two essential features of the modular economy are founded through the agent-based simulation of a duopolistic competition. First, market competition tends to be self-annihilating; the competition will eventually end up with a dominant or a monopoly firm (conglomerate). Second, the high-markup firm has a better chance to be the only survivor than its low-markup competitor. We analyze these features through the complex cyclical dynamics of prices, profits, dividends, investment, working capital, and quality.

https://lawprofessors.typepad.com/antitrustprof_blog/2014/07/non-price-competition-in-a-modular-economy.html

| Permalink

TrackBack URL for this entry:

https://www.typepad.com/services/trackback/6a00d8341bfae553ef01a73ddb3b61970d

Listed below are links to weblogs that reference Non-Price Competition in a Modular Economy:

Comments

Post a comment