Software Agents and the Information Economy

Humans are on the verge of losing their status as the sole economic
species on the planet. In private laboratories and in the Internet
laboratory, researchers and developers are creating a variety of
autonomous, economically-motivated software agents endowed with
algorithms for maximizing profit or utility.  Many economic software
agents will function as miniature businesses, purchasing information
inputs from other agents, combining and refining them into information
goods and services, and selling them to humans or other agents.  Their
mutual interactions will form the information economy: a complex
economic web of information goods and services that will adapt to the
ever-changing needs of people and agents. The information economy will
be the largest multi-agent system ever conceived, and an integral part
of the world's economy.

One cannot predict how this new world economy will behave simply by
extrapolating from hundreds of years of economies in which humans have
been the only players. Economic software agents differ from their
human counterparts in several ways. They operate more quickly on more
up-to-date and accurate information, yet on the other hand they have
much less world experience and common sense. In an effort to both
understand and design the macroeconomic behavior of the future
information economy, we have simulated several different markets and
economies populated with economic software agents employing a variety
of plausible pricing and bidding algorithms. I will present several
interesting macroeconomic behaviors that we have observed and
analyzed, including cyclical price wars and complex strategic
interactions that are reminiscent of the prisoner's dilemma. I will
then discuss how insights gained from our studies can be used to
design not just market mechanisms, but the agents themselves -- an
opportunity that traditionally has not been available to economists.