Leapfrogging of a deterministic model for microeconomic systems in competitive markets

Abstract

The Behrens-Feichtinger model provides a deterministic picture for the co-evolution of sales of two firms, producing the same goods and competing in a common market. The model involves an active investment strategy such that the temporary investment of each of the two firms depends on its relative position in the market. In this work we are interested in a specific regime of evolution referred to as leapfrogging regime, in which each firm has the possibility to dominate the market alternately during some finite period of time. We examine conditions favoring the leapfrogging dynamics of the model by introducing two appropriate variables, namely the sale difference and total sale of the two firms at any time. An analysis of stability of fixed points of the resulting coupled discrete nonlinear equations is carried out, and the bifurcation diagrams of the sale difference and sum with respect to the elasticity coefficient, are generated. A time-series analysis suggests that the leapfrogging regime, characterized by periodic oscillations of the sale difference from positive to negative branches, is stabilized by specific values of characteristic parameters of the model and when in addition the elasticity coefficient, related to the difference in investment strategies of the two firms, is reasonably high. A positive sign of cumulated sales at any time is required to ensure the availability of goods during the leapfrogging dynamics.