Dynamic Model of the Price Dispersion of Homogeneous Goods

2015

BJEMT

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ABSTRACTA new microeconomic model is presented that aims at a description of the long-term unit sales and price evolution of homogeneous non-durable goods in polypoly markets. It merges the product lifecycle approach with the price dispersion dynamics of homogeneous goods. The model predicts a minimum critical lifetime of non-durables in order to survive. Under the condition that the supply side of the market evolves much faster than the demand side the theory suggests that unsatisfied demands are present in the first stages of the lifecycle. With the growth of production capacities these demands disappear accompanied with a logistic decrease of the mean price of the good. The model is applied to electricity as a non-durable satisfying the model condition. The presented theory allows a deeper understanding of the sales and price dynamics of non-durables.

Section: Discussionmentioning

confidence: 99%

Dynamic Model of Markets of Homogenous Non-durables

2015

BJEMT

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“…It is shown that this process can be described by a Fisher-Pry law of the unit sales market shares. As established in a previous work the price dynamics of homogeneous goods can be regarded as a meeting process of demanded (required) with supplied (available) product units generating a price dispersion of the form of a Laplace distribution [20,21]. The mean price of this distribution declines for homogenous goods according to a logistic law for the case of a fast growing supply [18,19].…”

Section: Introductionmentioning

confidence: 93%

“…In order to establish the price evolution of the i-th generation we introduce the number of demanded and supplied units x i (p,t) and z i (p,t) as accumulated functions over the price p [21]. Generalizing Eq.…”

Section: Price Evolution Of a Homogeneous Generationmentioning

confidence: 99%

“…As established in [21] the price dispersion of homogeneous goods can be approximated with Eq. (20) for short time horizons by a symmetric Laplace distribution.…”

Section: Price Evolution Of a Homogeneous Generationmentioning

confidence: 99%

“…Also established is that the mean price evolution can be described by a Walrus equation [21]. For a homogenous good it has the form:…”

Section: Price Evolution Of a Homogeneous Generationmentioning

confidence: 99%

See 2 more Smart Citations

Dynamic Model of Markets of Successive Product Generations

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ABSTRACTA dynamic microeconomic model is presented that establishes the price and unit sales evolution of heterogeneous goods consisting of successive homogenous product generations. It suggests that for a fast growing supply the mean price of the generations are governed by a logistic decline towards a floor price. It is shown that generations of a heterogeneous good are in mutual competition. Their market shares are therefore governed by a Fisher-Pry law while the total unit sales are governed by the lifecycle dynamics of the good. As a result the absolute unit sales of a generation exhibit a characteristic sales peak consisting of a rapid increase followed by a long tail. The presented approach shows that the evolution of successive product generations can be understood as an evolutionary adaptation process. The applicability of the model is confirmed by a comparison with empirical investigations on successive DRAM generations.

The Product Life Cycle of Durable Goods

2015

BJEMT

Self Cite

A dynamic model of the product lifecycle of (nearly) homogeneous durables in polypoly markets is established. It describes the concurrent evolution of the unit sales and price of durable goods. The theory is based on the idea that the sales dynamics is determined by a meeting process of demanded with supplied product units. Taking advantage from the Bass model for first purchase and a logistic model for repurchase the entire product lifecycle of a durable can be established. For the case of a fast growing supply the model suggests that the mean price of the good decreases according to a logistic law. Both, the established unit sales and price evolution are in agreement with the empirical data studied in this paper. The presented approach discusses further the interference of the diffusion process with the supply dynamics. The model predicts the occurrence of lost sales in the initial stages of the lifecycle due to supply constraints. They are the origin for a retarded market penetration. The theory suggests that the imitation rate B indicating social contagion in the Bass model has its maximum magnitude for the case of a large amount of available units at introduction and a fast output increase. The empirical data of the investigated samples are in qualitative agreement with this prediction.