How do rms transition between monopoly and competitive behavior? An Agent-based Economic Model

Artiicial life has long held out the promise of revolutionizing how scientists approach a variety of problems. In this paper we describe an application of ar-tiicial life techniques to the study of a fundamental problem in economics: How does a rm transition from monopoly behavior to competitive behavior as other rms enter the market? Solving traditional economic models provides the equilibrium, but does not give the path to equilibrium.The rms in our artii-cial life simulation do not have access to any global information about the market. The resulting global behavior that arises from this local price-setting behavior is the equilibrium predicted by the traditional analytical models. Hence, our simulation provides a proof by example that simple, local rules of interaction can create the global regularities observed and predicted by economists, thus providing a relatively low upper bound on how complex rm agents must be to reach equilibrium. In this paper we describe the various agents in the model{{rms, consumers, capital suppliers, labor suppliers{and present the outcome of several simulations of the model.