Equal chances, unequal outcomes? Network-based evolutionary learning and the industrial dynamics of superstar firms

Abstract

With the advent of platform economies and the increasing availability of online price comparisons, many empirical markets now select on relative rather than absolute performance. This feature might give rise to the ‘winner takes all/most’ phenomenon, where tiny initial productivity differences amount to large differences in market shares. We study the effect of heterogeneous initial productivities arising from locally segregated markets on aggregate outcomes, e.g., regarding revenue distributions. Several of those firm-level characteristics follow distributional regularities or ‘scaling laws’ (Brock in Ind Corp Change 8(3):409–446, 1999). Among the most prominent are Zipf’s law describing the largest firms‘ extremely concentrated size distribution and the robustly fat-tailed nature of firm size growth rates, indicating a high frequency of extreme growth events. Dosi et al. (Ind Corp Change 26(2):187–210, 2017b) recently proposed a model of evolutionary learning that can simultaneously explain many of these regularities. We propose a parsimonious extension to their model to examine the effect for deviations in market structure from global competition, implicitly assumed in Dosi et al. (2017b). This extension makes it possible to disentangle the effects of two modes of competition: the global competition for sales and the localised competition for market power, giving rise to industry-specific entry productivity. We find that the empirically well-established combination of ‘superstar firms’ and Zipf tail is consistent only with a knife-edge scenario in the neighbourhood of most intensive local competition. Our model also contests the conventional wisdom derived from a general equilibrium setting that maximum competition leads to minimum concentration of revenue (Silvestre in J Econ Lit 31(1):105–141, 1993). We find that most intensive local competition leads to the highest concentration, whilst the lowest concentration appears for a mild degree of (local) oligopoly. Paradoxically, a level playing field in initial conditions might induce extreme concentration in market outcomes.

Energy Security: A Conceptual Overview

“…It is referred to as the application of economic instruments to promote national interests and achieve beneficial geopolitical results [187]. The logic of the competition processes, the "winner takes it all", results in huge resource flows with little difference in efficiency [188]. On both a macro and micro scale, even small differences in efficiency result in significant differences in competitiveness.…”

One Model, Multiple Stories? Using Agent-Based Models to Unveil Structural Similarities in a Complex World

“…Asgharpourmasouleh et al (2019) study different protest movements in Iran and Germany using the same model structure but with different assumptions and attributing slightly different interpretationsor stories -to some elements. Schulz & Mayerhoffer (2021) themselves only feature one model about industrial innovation dynamics, but its very structure with an entirely different story is used to track discursive patterns in crises in a forthcoming article. Finally, the structure of the model in , which captures the evolution of adolescents' stance towards queerness in a single generation, is extended in another forthcoming article for application to a broader range of values and to capture inter-generational impact patterns in a longer period.…”