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THE MECHANISM OF EVOLUTIONARY SELECTION OF FIRMS WITH DIFFERENT SOCIAL RESPONSIBILITY

V. Kobets () and S. Diorditsa ()
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V. Kobets: Associate Professor of the Department of Informatics, Software Engineering and Economic Cybernetics of Kherson State University
S. Diorditsa: Professor of the Departnment of Economic Cybernetics of Odessa National Economic University

Economics of Development, 2016, vol. 77, issue 1, 54-60

Abstract: Microeconomic systems operate in a rapidly changing turbulent globalized environment. It generates the problem of forecasting the dynamics of adjustment of such systems to the actions of both the rivals and the market environment as a whole. The traditional approach in microeconomics examines the equilibrium state of microeconomic systems, assuming perfect rationality, complete knowledge and instantaneous adaptation of firms to changes in market conditions. Also, in accordance with the classical approach, the purpose of the selfish firms in the market is to maximize their own profits. But the reality confirms that most of the time participants in microeconomic systems are in a nonequilibrium state and such systems react to the changes in the environment and actions of competitors with certain inertia. In the proposed model of microeconomic system, the goal of firms-reciprocators is getting a stable profit over a long-run period rather than profit maximization. To achieve this, both the firm profit and consumer surplus are included in the profit function of reciprocators. A model of competition between the two types of firms (reciprocators and selfish firms) has been developed to determine which of the firm types is more competitive. The mechanism of evolutionary selection of the firms is their adaptability to competitive conditions with profit taken as a criterion. The type of social responsibility of firms which gets larger profits in the market will expand. The conditions have been determined under which firms-reciprocators produce more products and get higher profit in the market than the selfish ones. Conditions have been simulated under which only reciprocators remains in the market and a fixed level of their market power has been calculated by means of the Herfindahl – Hirschman index. To construct a discrete dynamic model of competition between the two types of firms, the conditions have been determined under which the microeconomic system returns to equilibrium only for a very limited range of social preferences. In other cases, any external impact may unbalance the system forever.

Keywords: microeconomic system; social responsibility; firm-reciprocator; evolutionary dynamics; quantitative competition. (search for similar items in EconPapers)
Date: 2016
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