An Agent-Based Model of the Extinction Patterns
of Capitalism's Largest Firms
Paul Ormerod, Helen Johns and Laurence Smith
pormerod@volterra.co.uk
Paper URL: http://www.volterra.co.uk/downloads.html
Power-law distributions (fractal behaviour) in a system's
macroscopically observable quantities are a characteristic property of many-body
systems representing the effects of complex interactions amongst the constituents
of the system. Power law distributions are both self-similar and scale
free, demonstrating that events may occur on all lengths and time scales.
The empirical relationship between the frequency and
size of extinctions of capitalism's largest firms is described well by a
power law. This power law is very similar to that which describes the
extinctions of biological species in the fossil record.
We develop an agent-based model of the evolution and
extinction of firms based on simple principles of economics. The properties
of the model conform closely to the empirical evidence.
The model contains N agents, and all pairs of agents
are connected to each other. Individual agents interact with each other,
sometimes in co-operative symbiosis and sometimes in direct competition.
The model evolves in a series of steps. The rules
of the model specify a) how the connections are updated b) how the fitness
of each agent is measured c) how an agent becomes extinct and d) how extinct
agents are replaced.