An Evolutionary Model of Brand Competition

We study the evolutionary dynamics of brand competition in a market where two firms are competing against each other. A brand's strategy at each period could be either to innovate on its own or to copy the rival or maintain the same position as before. Consumers are heterogenous, they interact with each other, and under bounded rationality choose one of the products every period, based on their characteristics and price. A multi-agent simulation has been designed under three specifications - no network, a random network and a 2-level network. The cases of no networks, random networks and 2-level networks of different densities give very different results in terms of attainment of equilibrium. Moreover, convergence is always more frequent and faster in case of dense 2-level networks and in the case of sparse random networks. It was also noticed that a skew in the distribution of consumers in the characteristics space leads to more variation in equilibrium values as well as in the likelihood of convergence