Outflow Dynamics in Modeling Oligopoly Markets: The Case of the Mobile Telecommunications Market in Poland

TL;DR

This paper introduces two opinion dynamics models for oligopoly markets, applied to the Polish mobile telecom sector, revealing critical thresholds for market lock-in and aligning with social conformity levels.

Contribution

It presents novel models combining social interactions and advertising effects, calibrated to real market data, and explores critical phenomena in consumer choice dynamics.

Findings

Market lock-in occurs below a critical advertising level.

Best model fits align with known social conformity levels.

Models successfully replicate real market behavior.

Abstract

In this paper we introduce two models of opinion dynamics in oligopoly markets and apply them to a situation, where a new entrant challenges two incumbents of the same size. The models differ in the way the two forces influencing consumer choice -- (local) social interactions and (global) advertising -- interact. We study the general behavior of the models using the Mean Field Approach and Monte Carlo simulations and calibrate the models to data from the Polish telecommunications market. For one of the models criticality is observed -- below a certain critical level of advertising the market approaches a lock-in situation, where one market leader dominates the market and all other brands disappear. Interestingly, for both models the best fits to real data are obtained for conformity level $p \in (0.3,0.4)$. This agrees very well with the conformity level found by Solomon Asch in his famous social experiment.