Modeling the impact of sanctions and import substitution on market performance

Varshavsky L.E.
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The article considers an approach to modeling the impact of sanctions and import substitution on the performance of high-tech product markets based on the use of control theory methods (operational calculus, z-transform). The model under consideration assumes that an equipment manufacturer supplies unique high-tech equipment to a high-tech product (HP) manufacturer that dominates the equipment consumer market. The HP manufacturer, fearing disruption of equipment supplies due to the introduction of all kinds of restrictions and sanctions, invests in the development of import-substituting equipment production in a third company, which can also find application in the external market, at the expense of deductions from its profits. The influence of the following factors and actions on the performance of the conditional market is analyzed: 1) the degree of inertia of the development and production development processes in the company; 2) the share of equipment of the import-substituting company supplied to the HP manufacturer; 3) sanctions (general and selective) on the supply of equipment to the company-manufacturer of the import substitution, as well as blocking the import substitution process in the third company by the first company.

The calculations show that the acceleration of the equipment development and production processes leads to a faster decrease in the production volumes of the first company. At the same time, an increase in price is observed, which is associated with a change in the parameters of the inverse demand function.

An increase in the share of equipment of the import-substituting company consumed by the second company can lead to a sharp increase in production volumes in the second and third companies, stabilization of production volumes in the first company and an increase in price.

The introduction of sanctions leads to a decrease in the production volumes and income of all companies relative to the baseline version. A significant change in price also occurs. However, due to the inertia of the equipment production processes in the example under consideration, a significant change in production volumes in the aggregate of companies occurs with a significant lag. This is especially characteristic of the third company, in which a noticeable deviation from the baseline version begins after 20 years. The blocking by the first equipment manufacturing company of investments in the development of import substitution in the third company ensures a relatively small gain for the first company in production volumes and NPV although allows to raise her market share.

Keywords: high-tech products, operational calculation, sanctions, import substitution, dynamics, market
Citation in English: Varshavsky L.E. Modeling the impact of sanctions and import substitution on market performance // Computer Research and Modeling, 2025, vol. 17, no. 2, pp. 365-380
Citation in English: Varshavsky L.E. Modeling the impact of sanctions and import substitution on market performance // Computer Research and Modeling, 2025, vol. 17, no. 2, pp. 365-380
DOI: 10.20537/2076-7633-2025-17-2-365-380
URL: http://crm-en.ics.org.ru/journal/article/3603/
Creative Commons License This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

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