The role of networks in firms’ multi-characteristics competition and market-share inequality

Athanasios Lapatinas and Antonios Garas

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a location analysis spatial model of firms’ competition in multi-characteristics space, where consumers’ opinions about the firms’ products are distributed on multilayered networks. Firms do not compete on price but only on location upon the products’ multi-characteristics space, and they aim to attract the maximum number of consumers. Boundedly rational consumers have distinct ideal points/tastes over the possible available firm locations but, crucially, they are affected by the opinions of their neighbors. Our central argument is that the consolidation of a dense underlying consumers’ opinion network is the key for the firm to enlarge its market-share. Proposing a dynamic agent-based analysis on firms’ location choice we characterize multi-dimensional product differentiation competition as adaptive learning by firms’ managers and we argue that such a complex systems approach advances the analysis in alternative ways, beyond game-theoretic calculations.

Keywords: location choice, networks, multi-characteristics space, networks; consumer behavior; decision heuristics; agent-based model (search for similar items in EconPapers)
JEL-codes: C63 C65 D72 L14 R39 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-bec, nep-com, nep-net and nep-ure
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https://mpra.ub.uni-muenchen.de/80566/8/MPRA_paper_80566.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:68959

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