Markets can show different types of dynamics, ranging from stable markets dominated by one or a few products, to fluctuating markets where products are frequently being replaced by new versions. This paper explores the dynamics of markets from a psychological perspective using a multi-agent simulation model. The behavioural rules of the artificial consumers, the consumats, are based on a conceptual meta-theory from psychology. The artificial consumers have to choose each period between different products. Products remain on the market for as long as their market share exceeds a minimum level. If not, it will be replaced by a new product. Simulation experiments are being performed with a population of consumats having different preferences. Results show that the dominating type of cognitive (choice) process has large consequences for the resulting market dynamics. Moreover, the size of the social network affects the market dynamics too.
Market Dynamics and Innovation Management on Performance in SMEs: Multi-agent Simulation Approach