MARKET DIMENSIONALITY AND THE PROLIFERATIONOF SMALL-SCALE FIRMS

We build an agent-based computational model to study how the changing number ofactive product variants in a two-dimensional product space affects the performance ofdifferent firm types (i.e. large-scale and small-scale enterprises). We use an alternativeapproach to measure product space dimensionality, considering that dimensions maybe a fraction of the Euclidean measure. The results confirm that high dimensionalitygives advantage to small-scale firms. Additionally, we find that large-scale firms may alsobenefit from initial increasing dimensionality, since it allows a small degree of productdifferentiation and price discrimination.