Abstract
This paper suggests an approach, based upon an analogy with different species competing in the environment for fixed resources, to the question of why variety is such a persistent feature of free market economies. Attention is centred upon a market characterised by a group of consumers with a distribution of incomes, which leads to a continuum of demands for different output qualities. The identification of various sufficient conditions then allows the argument to proceed through a mathematical structure first outlined in the theoretical ecology literature, resulting in a precise prediction regarding the limit to similarity between firms. This results is then applied to the U.K. Supermarket industry in 1988, and is used to provide guidance to the state of competition within the industry in that year.
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I would like to thank Ian Steedman for meticulous criticism of an early draft of this paper, and also two anonymous referees for similarly constructive and detailed comments. Thanks are also due to Alan Maynard and Patrick Minford for financial support whilst the paper was being written.
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Gallagher, M. Niche overlap and limiting similarity: an ecological approach to the theory of the firm. J Evol Econ 3, 63–77 (1993). https://doi.org/10.1007/BF01199989
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DOI: https://doi.org/10.1007/BF01199989