Variable structure modelling of dynamic industry systems

This paper argues for and develops a variable structure modelling methodology, that is one which treats individual players in an industry as agents and provides the means for agent entry and exit as well as evolution of their behaviour. The resulting simulation framework extends traditional industry dynamics approaches and object oriented simulation, unifies a number of concepts from software engineering, artificial intelligence and knowledge engineering and provides a rich, rule-based specification for describing a wide range of structural changes. The framework allows the evolution of both structure and behaviour over time and is especially suited for modelling dynamic industries and markets that can endogenously change their own structure. We demonstrate the features and power of the modelling platform with a stylised model of competition that extends earlier work in evolutionary economics and allows for firm entry and exit and outline a description of a business application to the telecommunications industry.