economic systems; dynamic models; control theory; cooperation
This paper demonstrates the utility of systems and control theory in the analysis of economic systems. Two applications demonstrate how the analysis of simple dynamic models sheds light on important practical problems. The first problem considers the design of a retail laboratory, where the small gain theorem enables the falsification of pricing policies. The second problem explores industrial organization using the equilibria of profit-maximizing dynamics to quantify the percentage of a firm’s profits due strictly to the cooperative effects among its products. This ”Value of Cooperation” suggests an important measure for both organizational and antitrust applications.
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