Evaluating Exploitation versus Exploration by Simulation

J. Debenham and S. Simoff (Australia)

Keywords

Economic simulation. Evolutionary mechanisms.

Abstract

A general simulation model of market competition is de veloped to explore the effectiveness of and interactions be tween different types product exploration and exploitation strategies i.e. innovation, imitation and process improve ment. The model, like real markets, is highly non-linear such that analytical solutions are not possible. We use sim ulation experiments to examine firm survival and the effec tiveness of different strategy mixes and show how these. depend on the length of time it takes for each strategy to bear fruit, the speed of new product diffusion and the du ration of product life cycles. The model is freely available on the Internet and provides the basis for further experi ments to examine the impact of different combinations of firm strategies on survival and performance.

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