Governing Competition and Collaboration in Network Industries Using Agent-Based Modeling: A Case-Study of US Air Transportation Network

Network industries include a multitude of organizations and companies delivering valuable services and products for modern life. Surprisingly, the impact of the structural complexity of their underlying physical infrastructure on the behavior of these organizations has not been explored yet. The aim of this paper is to study the role of an initial network structure on the throughput of these complex systems, and to provide evidence for the value of using agent-based modeling (ABM) in governing competition and collaboration in network industries. A two-stage multiround game provides the mathematical foundation to examine the behavior of players in the complex interconnected structure of a network industry. The United States Air Transportation Network is used as the case study. The real data on the different elements of the system are embedded into an agent-based model to provide a descriptive model of behaviors within it. The outcome of the model shows path dependence in the system and highlights the impact of initial network conditions on the market. Moreover, this model provides evidence on the usefulness of ABM for understanding the interrelationships between economic behavior and the physical structure of the system.