Information Games: Strategic Crowding and Firm Repositioning in Language-Model Space
A rational-share game separates opportunity effects from strategic crowding, while corpus-scale evidence shows that peer structure can persist as firms' absolute positions move.
Strategic repositioning under rivalry
The paper models firm positions as probability distributions over economic activities. Firms choose how to allocate capacity across opportunities while accounting for heterogeneous capabilities, costs, and rival participation. The ESCAPE model establishes a unique equilibrium and separates the effects of changing opportunities from strategic crowding.
Main results
In a benchmark many-firm economy, relative strategic responses account for 90.5% of the weighted composition-response contrast between strategic and independent firms. That component is numerically zero when capabilities are identical.
A corpus-scale analysis of corporate news finds that optimized peer reconstructions retain 86.5% of their aggregate validation advantage one year later, even as absolute distance from frozen reconstructions grows. The result points to persistent peer structure without a fixed destination.
Paper
The complete paper, including its formal derivations and empirical design, is available on arXiv.