Improving the performance of an economic system: Controlling chaos

In this paper we use a simple model of evolutionary market dynamics to illustrate how chaotic behavior can be controlled by making small changes in a parameter that is accessible to the decision makers. This approach is commonly referred to as 'targeting' - one can easily switch from a chaotic evolution of the market to any desired regular motion. We show that complex dynamics leads to inferior performance in our model and that an application of such a correction mechanism by the decision makers of the firms yields a considerable improvement in the system's economical properties in terms of profits and profitability. We present numerical simulations in order to illustrate the effectiveness of this method.