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An Agent Based Cournot Simulation with Innovation: Identifying the Determinants of Market Concentration

Tim Kochanski

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, I develop a hybrid model that contains elements of both agent based simulations (ABS) as well as analytic Cournot models, to study the effects of firm characteristics, market characteristics, and innovation on market concentration, as measured by a Herfindahl-Hirschman Index (HHI). The model accommodates the following components: multiple firms with heterogeneous marginal costs, market entry and exit, barriers to entry, low or high cost industries, changing demand, varying levels of marginal cost reducing returns-to-innovation, varying costs associated with innovation, increased returns to innovation from past experience innovating, and varying propensities to innovate within the market. The components mentioned above are commonly cited as determinants of market concentration. A sensitivity analysis which is robust to high degrees of model complexity demonstrates that the model provides results that are consistent with economic theories of markets.

Keywords: agent based simulation; Cournot; game; innovation; oligopoly (search for similar items in EconPapers)
JEL-codes: C79 D43 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-cmp, nep-com, nep-ent, nep-ino and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:16539

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