Using system dynamics to analyse interactions in duopoly competition

This article introduces non-linear dynamics to assess the interactions in d uopoly competition between two rivals. The generic competition is considere d here to be the competition for quality between two consumer durable produ cts. The authors have used a system dynamics approach to develop the model of interactions and simulate the behaviour over time. The outcomes of sever al hundred simulations have shown that the recognition and implementation l ags in quality improvement strongly influence the qualitative behaviour of the system. When the speed of adaptation to customer demand reaches a certa in value, a Hopf bifurcation occurs and the system converges into a limit c ycle. Quasi-periodicity and chaos emerge when further increasing the speed of the response. Instead of tending to equilibrium around an optimal qualit y value the model exhibits complex counter-intuitive behaviours. Copyright (C) 2000 John Wiley & Sons, Ltd.