Market Performance and Competition: A Product Life Cycle Model

The paper introduces a new simulation model of market dynamics by integrating several concepts of evolutionary economics. In the course of market evolution various changes take place of which the emergence of consumers’ preferences and of the knowledge that is needed to meet these preferences with appropriate products are the most important ones. In order to model the market evolution and the resulting changes, Dosi’s concept of technological paradigms and Winter’s concept of technological regimes are integrated into a product life cycle model. The simulations performed with this model help to understand how the dynamics of market evolution shapes market performance and competition. The results of the simulation runs show a much more differentiated picture than economic intuition suggests. Moreover, it gives useful hints for innovation policy.