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Firm Size Distribution in Oblivious Equilibrium Model with Quality Ladder

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Distributed Computing and Artificial Intelligence, 11th International Conference

Part of the book series: Advances in Intelligent Systems and Computing ((AISC,volume 290))

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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 (light-tail 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.

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Authors and Affiliations

  1. Department of Economic Engineering, Faculty of Economics, Kyushu University, Fukuoka, 812-8581, Japan

    Tetsushi Murao

Authors
  1. Tetsushi Murao
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Correspondence to Tetsushi Murao .

Editor information

Editors and Affiliations

  1. Faculty of Engineering, Osaka Institute of Technology, Osaka, Osaka, Japan

    Sigeru Omatu

  2. Université Libre de Bruxelles, Bruxelles, Belgium

    Hugues Bersini

  3. Dept. of Computing Science and Control Faculty of Science, University of Salamanca, Salamanca, Spain

    Juan M. Corchado

  4. Department of Computing Science and Control, Faculty of Science, University of Salamanca, Salamanca, Spain

    Sara Rodríguez

  5. Faculty of Engineering Management, Poznan University of Technology, Poznan, Poland

    Paweł Pawlewski

  6. Dep. PPEQS, Section of Economics and Quantitative Methods, University of Chieti-Pescara, Pescara, Italy

    Edgardo Bucciarelli

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Murao, T. (2014). Firm Size Distribution in Oblivious Equilibrium Model with Quality Ladder. In: Omatu, S., Bersini, H., Corchado, J., Rodríguez, S., Pawlewski, P., Bucciarelli, E. (eds) Distributed Computing and Artificial Intelligence, 11th International Conference. Advances in Intelligent Systems and Computing, vol 290. Springer, Cham. https://doi.org/10.1007/978-3-319-07593-8_13

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  • DOI: https://doi.org/10.1007/978-3-319-07593-8_13

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-07592-1

  • Online ISBN: 978-3-319-07593-8

  • eBook Packages: EngineeringEngineering (R0)

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