Abstract for: Business Competition as a Complex System: A System Dynamics Approach
The perfect competition paradigm of conventional microeconomics has traditionally been used as a reference to determine the efficiency of markets. However, there are very few industries that can be described with this model. This paper argues that the perfect competition model is based on very unrealistic and restrictive assumption, but when they are relaxed to introduce increasing returns to the growth of the firm, it is possible to think of business competition as a complex system. This paper also argues that the tools of system dynamics can be used to make explicit the way increasing returns cause the growth of the firm and determine the structure of the industry where it competes.