Physics – Condensed Matter – Statistical Mechanics
Scientific paper
2004-07-15
Physics
Condensed Matter
Statistical Mechanics
28 pages, 8 figures
Scientific paper
A model is presented of the market dynamics to emphasis the effects of increasing returns to scale, including the description of the born and death of the adaptive producers. The evolution of market structure and its behavior with the technological shocks are discussed. Its dynamics is in good agreement with some empirical stylized facts of industrial evolution. Together with the diversities of demand and adaptive growth strategies of firms, the generalized model has reproduced the power-law distribution of firm size. Three factors mainly determine the competitive dynamics and the skewed size distributions of firms: 1. Self-reinforcing mechanism; 2. Adaptive firm grows strategies; 3. Demand diversities or widespread heterogeneity in the technological capabilities of different firms. Key words: Econophysics, Increasing returns, Industry dynamics, Size distribution of firms
Di Zengru
Fan Ying
Li Menghui
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