The emergence of knowledge exchange: an agent-based model of a software market

TL;DR

This paper presents an agent-based model demonstrating how knowledge exchange naturally emerges among software providers, improving market efficiency without relying on high-level concepts like trust or reputation.

Contribution

It introduces a formal multi-agent simulation that explains the emergence of knowledge exchange and its positive impact on market efficiency.

Findings

Knowledge exchange emerges from simple assumptions.

Exchange behavior increases market efficiency.

No need for high-level concepts like trust or reputation.

Abstract

We investigate knowledge exchange among commercial organisations, the rationale behind it and its effects on the market. Knowledge exchange is known to be beneficial for industry, but in order to explain it, authors have used high level concepts like network effects, reputation and trust. We attempt to formalise a plausible and elegant explanation of how and why companies adopt information exchange and why it benefits the market as a whole when this happens. This explanation is based on a multi-agent model that simulates a market of software providers. Even though the model does not include any high-level concepts, information exchange naturally emerges during simulations as a successful profitable behaviour. The conclusions reached by this agent-based analysis are twofold: (1) A straightforward set of assumptions is enough to give rise to exchange in a software market. (2) Knowledge exchange is shown to increase the efficiency of the market.