Dynamics and stability in retail competition

Authors

VILLENA MJ ARANEDA Axel Alejandro

Year of publication 2017
Type Article in Periodical
Magazine / Source MATHEMATICS AND COMPUTERS IN SIMULATION
Citation
Doi http://dx.doi.org/10.1016/j.matcom.2016.09.011
Keywords Multi-market oligopoly; Cournot-Nash competition; Economies of scale; Stability; Chaos
Description Retail competition today can be described by three main features: (i) oligopolistic competition, (ii) multi-store settings, and (iii) the presence of large economies of scale. In these markets, firms usually apply a centralized decisions making process in order to take full advantage of economies of scales, e.g. retail distribution centers. In this paper, we model and analyze the stability and chaos of retail competition considering all these issues. In particular, a dynamic multi-market Cournot Nash equilibrium with global economies and diseconomies of scale model is developed. We confirm the non-intuitive hypothesis that retail multi-store competition is more unstable than traditional small business that cover the same demand. The main sources of stability are the scale parameter, the number of markets, and the number of firms. (C) 2016 International Association for Mathematics and Computers in Simulation (IMACS). Published by Elsevier B.V. All rights reserved.

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