Dynamic Model of Markets of Successive Product Generations

Joachim Kaldasch

EconStor Open Access Articles and Book Chapters, 2015, vol. 10, issue 3, 1-15

Abstract: A dynamic microeconomic model is presented that establishes the price and unit sales evolution of heterogeneous goods consisting of successive homogenous product generations. It suggests that for a fast growing supply the mean price of the generations are governed by a logistic decline towards a floor price. It is shown that generations of a heterogeneous good are in mutual competition. Their market shares are therefore governed by a Fisher-Pry law while the total unit sales are governed by the lifecycle dynamics of the good. As a result the absolute unit sales of a generation exhibit a characteristic sales peak consisting of a rapid increase followed by a long tail. The presented approach shows that the evolution of successive product generations can be understood as an evolutionary adaptation process. The applicability of the model is confirmed by a comparison with empirical investigations on successive DRAM generations.

Keywords: Product diffusion; multiple generations; evolutionary economics; competition; price evolution; DRAM market (search for similar items in EconPapers)
JEL-codes: C0 C1 D0 D11 L11 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:118689

DOI: 10.9734/BJEMT/2015/20473

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