Heterogeneity in Innovation Strategies, Evolving Consumer Preferences and Market Structure: an Evolutionary Multi-agent Based Modelling Approach

The aims of this paper are twofold. The first is to analyse the interaction between research and development (R&D) activities of firms and heterogeneous consumer preferences in structuring the evolution of an industry. The second is to explore the heterogeneity in firms’ innovation strategies. Is heterogeneity sustainable in the long-term and what happens to the market shares of firms having different innovation strategies when a structural market characteristic (market size) or a behavioural rule (R&D intensity) is changed? To answer these research questions, an evolutionary, multi-agent based, sector-level innovation model is designed. The model addresses supply and demand sides of the market simultaneously with the co-evolution of heterogeneous consumer preferences, heterogeneous firm knowledge bases, and technology levels at the micro level.