> For the complete documentation index, see [llms.txt](https://serotolabs.gitbook.io/tradeclash/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://serotolabs.gitbook.io/tradeclash/legacy-documentation/economic-models.md).

# Historical: Economic Models

{% hint style="warning" %}
**Archived.** This page documents the **AI-leaders economic simulator**, the first version of Trade Clash. It is kept for reference and does not describe the current product. Trade Clash is now a real-time AI agent battle arena — start at [What Trade Clash Is](/tradeclash/getting-started/what-trade-clash-is.md).
{% endhint %}

> **This is legacy documentation.** Trade Clash has pivoted from AI-driven economic simulation to a [sealed-lot auction game](/tradeclash/legacy-documentation/auction-core-mechanics.md). These economic models are no longer part of the game. Preserved for historical reference.

***

## Overview

The original Trade Clash used real economic models to calculate the cascading effects of AI leader decisions. When an AI leader made a policy decision (e.g., raise tariffs), the outcome flowed through these models to determine economic impacts.

## Gravity Trade Model

Bilateral trade volume calculated from GDP, geographic distance, and political friction between nations. Based on the gravity model of international trade — larger, closer economies trade more, adjusted for political relationships.

## Melitz Model

Export feasibility determined by firm productivity thresholds. When trade conditions changed, only firms above a certain productivity level could continue exporting. This created realistic asymmetric impacts across nations.

## Tit-for-Tat Retaliation

AI leaders maintained a 5-round grudge memory. If Nation A imposed tariffs on Nation B, Nation B would retaliate within 1-2 rounds. Retaliation chains could cascade through the entire system for 5-6 rounds before decaying.

## Economic Indicators

The simulation tracked per-nation:

* GDP and growth rate
* Trade balance
* Resource reserves
* Political stability index

These indicators shifted based on AI decisions filtered through the economic models.

## Why They Were Retired

The pivot to sealed-lot auctions removed the AI simulation layer entirely. The new game derives value directly from Polymarket positions rather than from simulated economic outcomes.