Cantner, Uwe, Savin, Ivan and Vannuccini, Simone (2019) Replicator dynamics in value chains: explaining some puzzles of market selection. Industrial and Corporate Change. ISSN 0960-6491

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Abstract

The pure model of replicator dynamics provides important insights in the evolution of markets but has not met with much empirical support. This article extends the model to the case of firms vertically integrated into value chains (VCs). Through an extended analytical model and numerical simulations, we show that (i) by taking VCs into account, the replicator dynamics may reverse its effect. In these ”regressive developments” of market selection, firms with low fitness expand because of being integrated with highly fit partners, and the other way around; (ii) allowing a partner’s switching re-introduces selection forces into the upper layers of VCs; and (iii) periods of instability in the early stage of the industry life cycle may be the result of an optimization’ of partners within a value chain, thus providing a novel and simple explanation of the evidence discussed earlier in the literature.

Item Type:	Article
Schools and Departments:	School of Business, Management and Economics > SPRU - Science Policy Research Unit
Subjects:	H Social Sciences > HB Economic theory. Demography > HB0238 Competition. Monopolistic competition H Social Sciences > HB Economic theory. Demography > HB0241 Production. Theory of the firm. Supply-side economics
Depositing User:	Simone Vannuccini
Date Deposited:	10 Jan 2019 12:28
Last Modified:	10 Jan 2019 14:34
URI:	http://srodev.sussex.ac.uk/id/eprint/81206

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