On the coevolution of the product quality and the consumer preferences

Abstract

This paper will analyze the self-reinforcing coevolutionary process of innovation, based on the framework of evolutionary ecology and population genetics. In particular, central to this analysis is Fisher's runaway process, which demonstrates the coevolution of the quality of products and the preferences of consumers in our context. The four main points this paper seeks to make are as follows. First, it can be concluded from a matching model of supply and demand that when a consumer who has a preference for high quality discovers a product of high quality in the market, he/she will certainly purchase that product. Second, taking account of both the high survival rate of a firm that supplies a product of high quality and the cost to the firm of improving the quality, evolutionarily stable Fisher's process can be explained. Third, however, considering the misfortune of a consumer who has a too-high preference, Fisher's process will disappear. Fourth, with the existence of power-users or the effect of the negative bias of innovation, Fisher's process can be recovered.