Michael de la Maza
Redfire Capital Management Group
950 Massachusetts Ave., Suite 209
Cambridge, Massachusetts 02139
RedfireGrp@aol.com
Ayla Ogus
Department of Economics
Boston College
Chestnut Hill, Massachusetts 02167
ogus@bc.edu
Deniz Yuret
Artificial Intelligence Laboratory
Massachusetts Institute of Technology
Cambridge, Massachusetts 02139
deniz@mit.edu
Artificial life has long held out the promise of revolutionizing how scientists approach a variety of problems. In this paper we describe an application of artificial life techniques to the study of a fundamental problem in economics: How does a firm transition from monopoly behavior to competitive behavior as other firms enter the market? Solving traditional economic models provides the equilibrium, but does not give the path to equilibrium.The firms in our artificial 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 firm agents must be to reach equilibrium. In this paper we describe the various agents in the model-firms, consumers, capital suppliers, labor suppliers-and present the outcome of several simulations of the model.