Firm size distribution in oblivious equilibrium model with quality ladder

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

In this article, we investigate a simulated firm size distribution in the model of Weintraub, Benkard, and Van Roy (Operations Research, 2010) which is a oblivious equilibrium (OE) model with a canonical quality ladder setting of Pakes and McGuire (Rand Journal of Economics, 1994). In previous research, validity of applying an OE model in a specific context have been assessed in two aspects: (i) how precisely the OE could replicate the MPE outcomes (lighttail condition); and (ii) whether restricting agents' information (so does strategy) could be reasonable. In contrast, we propose a new criterion for the validity of OE models: whether equilibria could replicate power law of firm size distribution that is typically observed in real world data. We find that, as the quality depreciation probability or the investment cost becomes higher, the distribution comes closes to power law. On the other hand, the entry cost have virtually no impacts on the curvature of log-log plots.

Original languageEnglish
Title of host publicationDistributed Computing and Artificial Intelligence, 11th International Conference, DCAI 2014
PublisherSpringer Verlag
Pages99-106
Number of pages8
ISBN (Print)9783319075921
DOIs
Publication statusPublished - 2014
Event11th International Symposium on Distributed Computing and Artificial Intelligence 2014, DCAI 2014 - Salamanca, Spain
Duration: Jun 4 2014Jun 6 2014

Publication series

NameAdvances in Intelligent Systems and Computing
Volume290
ISSN (Print)2194-5357

Other

Other11th International Symposium on Distributed Computing and Artificial Intelligence 2014, DCAI 2014
CountrySpain
CitySalamanca
Period6/4/146/6/14

All Science Journal Classification (ASJC) codes

  • Control and Systems Engineering
  • Computer Science(all)

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