Modeling Market Dynamics: Problems In Basic Market Space

For its importance of being one social reality, the investigation of market mechanism is always an important topic in human intellectual field, and particularly becomes the focus of management and economics research. Market dynamics also makes market as its central research object. Based on the previous researches, Market dynamics tries to utilize new scientific ideas and techniques to deepen our understandings of market mechanism from new perspectives.Market is a complex system which consists of various agents. These agents may show great differences between each other, and with their expects they take part in market process, give and receive influences positively or passively, found relations and (or) break them again, and during unceasing interactions they act to fulfill their desires, affect the changing market structure and receive its influence from the latter again. There may be multiple relations, besides market relations there may be other kinds of relations, like pre-market relations or non-market relations. All these acting agents and the relations existing among them compose market and determine its formation and change. Market dynamics attempts to depict the dynamical and interactive characteristic of market phenomena in a natural manner. And its fundamental problem can be defined as how market system evolves during the time and what is (or are) the condition(s) for the evolution. In other words, market dynamics explores the components of market system, their structures and evolutions of these components and the system.The dissertation proposes the fundamental problem of market dynamics, its extensions, and further summarizes its methodological features and knowledge foundations. Market dynamics reflects the research patterns before it and receives the influences from the new paradigm. Traditional studies always can not deal with the active market agents properly. Compared with them, market dynamics tries to understand the behaviors of these agents which are embedded in concrete context properly. And different from the mechanistic pattern which is built on the reversibility, reduction, equilibrium and controllable experiments, market dynamics explores market problems from the complexity perspective which emphasizes openness, adaptability, and uncertainty, and utilizes the scientific techniques coming along with this perspective to achieve its research vision. Then this research summarizes the modeling principles of market dynamics, which includes phenomenological principle and individual principle, and the former demands dynamics model should reflect the market phenomena as close as possible, and the latter emphasizes the model should be built up with individual agent and represent the heterogeneity of the agent sufficiently. Several modeling patterns are also summarized and explained. Modeling may implement ad hoc approach, theory-first approach, or theory-later approach. From another angle, modeling can be universalism which gives prominence to formal specification to improve its applicability, or modeling can be specialism which emphasizes the particularity of components to solve special problem more efficiently. Also research discusses the different meanings of market dynamics and based on this discussion proposes the framework and procedure of market dynamics. Besides, the dissertation introduces the necessary theories and techniques for modeling needs in basic market space which consists of basic market agents, including consumer agent and enterprise agent.Market dynamics is problem-oriented. Then the dissertation divides the basic market scenario into two more concrete sub-scenarios, which are new product adoption scenario and repeated purchase scenario, and investigates typical problems along with them exhaustively, including mechanism analysis, formal modeling and index design.For new product adoption scenario, research analyzes this process with the influence of word of mouth (WOM), especially with negative WOM in detail, and explores the interaction between mass media and WOM. And this investigation includes the analysis of consumer new product adoption mechanism (multilevel mode), state analysis and rules specification, and based on these puts forward one dynamical adoption model to capture the influence of negative WOM. Besides these, research customizes various indices to measure new product adoption process, which includes adoption ratio index (α), process maximum rate index (ν) and relative WOM effects index ((?)) to achieve a systematical understanding of new product adoption from the viewpoints of process, result and comparison.Modeling for repeated purchase scenario has a more generic appeal. And for consumer agent modeling, research formalizes the rules for product utility evaluation, product choice, utility adaptability and the represent of consumer loyalty to characterize the behavior of consumer.And for enterprise agent modeling, research proposes a generic conceptual framework which views enterprise as an activity-capability-resource-and-product complex, and based on this descriptive framework, the dissertation clarifies the relation among capability, product, resource and capability indicator, and formalizes the product offering and adaptability, and capability update of enterprise systemically. In fact, product adaptability research equals the analysis and design of competitive strategy, and in this section the dissertation presents two basic strategy alternatives, which are consumer-oriented strategy and market leader-oriented strategy (The third one is first-entry strategy which is discussed under the sequential-entry scenario), points out their variants and applicability. Capability update has relation to the represent of enterprise capacity essentially. And from the perspective of learning-by-doing, research proposes the capability update rules.The dissertation also designs various measure indices to capture the evaluation characteristics of repeated purchase scenario. For the analyses of consumer utility, average personal utility measure index (Φ), average social utility measure index ((?)) and average total utility measure index (Π) are proposed. And for the analyses of enterprise and market, market share index (s), market share range ratio index (r), market dominance index (g), market leader change rate index (Θ), consumer brand turnover rate index (Δ) and products difference rate index (Ω) are put forward. All of these indices can be used to capture the structures and evolutions of market and consumer utility.Based on these formal modeling works, research utilizes simulation technique and statistics methods to investigate the typical problems under these basic scenarios.For new product adoption scenario, research explores the influences of network structure, the size of consumer local world and the ratio of negative WOM and their interactions. And the following results are attained. First, under the influences of above factors, the adoption process of new product happening within network shows its multiple S-shaped characteristics. Second, WOM process indeed affects the adoption of new product. Third, negative WOM also indeed affects new product adoption obviously, and can change its result and process at the same time. More exactly, with the increase of ratio of negative WOM, both final adoption ratio and the process maximum adoption rate decrease. And because of its interactions with other influence factors, the effect of WOM shows its nonlinearity. Fourth, network topology influences the adoption of new product. And compared with WS small world network, BA scale-free network has a sharper effect. And finally, the size of local world shows its influence, and bigger local world would magnify the effect of WOM.Research further divides repeated purchase scenario into another three different sub-scenarios, they are simultaneous-entry-without-competition-strategy scenario, simultaneous-entry-with-competition-strategy scenario, and sequential-entry scenario. And based on the above formal modeling, research explores certain basic problems under these typical scenarios.For simultaneous-entry-without-competition-strategy scenarios, results indicate that duopoly market (M1=2) has distinct characteristics, i.e., duopoly market is unstable, with the lapse of time, the market would be dominated by only one enterprise, which is obvious so for high social tendency condition. For the market consisting of three enterprises (M1=3), during a given time period, enterprises coexist and no one dominates the market, but the consumer brand turnover rate decreases. And for the market with ten enterprises (M1=10), market dominance indicator and market share range ratio both stay at a very low level, and there is no sign to indicate any decrease tendency for these two indices, all of these show multiple-enterprise market has an obvious competition characteristics.Simulation results also indicate that under many scenarios, average consumer utility show its adaptability. With the increase of purchase times, if there are not too many enterprises in market space, almost all of utility components (average meaning) upgrade themselves. And the increase of average social utility means the formations of certain brand isles, which indicates more people choose the same brand. And proper number of brand increases average personal utility, but too many choices decrease it. For average social utility, with the increase of brand number, it decreases always. Social tendency also affects average utility and its components and make average total utility have different level for different number of brand, more exactly, if there are only a few brands, high social tendency results higher average total utility, otherwise low social tendency achieves so.Under simultaneous-entry-with-competition-strategy scenarios, the effectiveness of the first two strategies is validated. Results indicate under all of current test scenarios these strategies both are effective for the market followers. But their mechanisms are different. For consumer-oriented strategy, it changes product offering according to the (average) preferences of consumers to meet their needs directly, and hence increases market performance of strategy launcher. And this strategy can always achieve the win-win result, that is, strategy improves follower's market performance and increases the utility of consumers at the same time. Leader-oriented strategy is indirect, compared with consumer-oriented strategy, it can always improve the performance of strategy launcher but sometime may fail to increase consumers' utilities and sometimes even decreases the average level of consumers'utility, and it is obvious so under high social tendency scenarios.For sequential entry scenarios, simulations show that there exists two different entry modes, and they are (1+X) mode and (X+Y)(X≥2) mode. Results indicate if the entry time lag is not too short, (1+X) mode makes a very desirable market position for the first entrant, and at least keeps it as market leader; and if the entry time lag is enough long, it is almost impossible for new enterprises to enter this kind of market. And for (X+Y)(X≥2) mode, under certain conditions, it also brings comparative advantage for the first two entrants, although these conditions may be severer. In other words, sequential entry scenarios analyses show that first-entry strategy is an effective strategy under many different conditions.Practical implications follow theoretical discussions. For example, for new product adoption scenario, theoretical results request the launcher of new product must pay attention to the effects of negative WOM, network structure and the size of local world and their interactions, and especially understand the influence of the bigger local world coming along with information society. Research also systemically discusses the applicability and the characteristics of different strategies, which would guide the practical decision-making.The dissertation concludes with the discussions of the future research themes of market dynamics.