We study product differentiation equilibria and dynamics on the Salop circle under bounded rationality. Due to bounded rationality, firms tend to agglomerate in pairs. Upon adding a second tier of component suppliers, downstream assemblers may escape pairwise horizontal agglomeration. Moreover, we find a persistent propensity to vertically agglomerate near suppliers as well as ubiquitous dynamic equilibria. Conclusively, to understand product differentiation equilibria and dynamics, products and their supply chains need to be disaggregated.
|Titel||Proceedings of the 18th Asia Pacific Symposium on Intelligent and Evolutionary Systems|
|Redacteuren||H. Handa, H. Ishibuchi, Y.-S. Ong, K.-C. Tan|
|Plaats van productie||Berlin|
|Status||Gepubliceerd - 2015|
|Naam||Proceedings in Adaptation, Learning and Optimization|
|ISSN van geprinte versie||2363-6084|