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Firm routines, customer switching and market selection under duopoly

Author

Listed:
  • Martin Currie

    (School of Economic Studies and ESRC Centre for Research on Innovation and Competition, Victoria University of Manchester, Manchester M13 9PL, UK)

  • Stan Metcalfe

    (School of Economic Studies and ESRC Centre for Research on Innovation and Competition, Victoria University of Manchester, Manchester M13 9PL, UK)

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.

Suggested Citation

  • Martin Currie & Stan Metcalfe, 2001. "Firm routines, customer switching and market selection under duopoly," Journal of Evolutionary Economics, Springer, vol. 11(4), pages 433-456.
    • Handle: RePEc:spr:joevec:v:11:y:2001:i:4:p:433-456
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    Citations

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    Cited by:

    1. Francesco Saraceno & Jason Barr, 2008. "Cournot competition and endogenous firm size," Journal of Evolutionary Economics, Springer, vol. 18(5), pages 615-638, October.
    2. Harrington, Joseph Jr. & Chang, Myong-Hun, 2005. "Co-evolution of firms and consumers and the implications for market dominance," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 245-276, January.
    3. Werner Hölzl, 2012. "Mobility Barriers and the Speed of Market Selection," WIFO Working Papers 437, WIFO.
    4. J. Metcalfe, 2002. "On the Optimality of the Competitive Process: Kimura's Theorem and Market Dynamics," Journal of Bioeconomics, Springer, vol. 4(2), pages 109-133, May.

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