Supplementary material from "Tit-for-Tat Strategies Drive Growth and Inequality in Production Economies"

Increasing inequality in free-market economies worldwide undermines stability, fueling extremism and crime. We consider an abstract model of an expanding economy with connected agents, which captures the circularity and dynamism of real economies. The agents, acting as producers, continuously produce and trade goods, while adjusting their strategies for investing in these goods based on past performance. This adjustment process is based on tit-for-tat responses to mirror the market behaviors of others. We show this model captures central phenomena observed in real-life markets such as growth, inequality, and free-riding. Specifically, we find that the economy grows whenever growth is feasible within the parameters of the model. However, growth is accompanied by rising inequality, with rich and poor agents emerging and the gaps between their fortunes expanding over time.