Firm routines, customer switching and market selection under duopoly

Martin Currie and John Metcalfe
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Martin Currie: School of Economic Studies and ESRC Centre for Research on Innovation and Competition, Victoria University of Manchester, Manchester M13 9PL, UK

Journal of Evolutionary Economics, 2001, vol. 11, issue 4, 433-456

Abstract: This paper explores the dynamics of market selection for an industry in which firms employ relatively simple pricing, production and investment routines and in which consumers switch between rival firms in response to price differentials but do not all do so instantaneously. The key issue is whether market processes result in the elimination of less efficient firms by their more efficient rivals. That is to say, do such processes unfailingly increase the efficiency with which available economic resources are used? In the context of duopoly, we show that the survival of the more efficient firm is not guaranteed and that, more generally, the outcome depends upon the speeds with which firms adjust prices and capacities and with which customers switch between rival firms.

Keywords: Non-linear; dynamics; -; Firm; adjustment; routines; -; Market; selection (search for similar items in EconPapers)
Date: 2001-10-24
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