Drawing the town…

The AI
Layoff Trap

Every company makes the smart choice. Together they make everyone poorer, owners included. Play the 2026 economics paper that shows how.

Household spending

100%

Jobs lost0

Your profit100

Rivals' profit100

person with a job
laid off
AI robot
money spent
home with income

Your automation

The six other factories

Gold tick: your most profitable level, whatever the others do.

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The numbers

Your best move never changes

Your profit for every automation level, given what the six others do. Switch them between 0%, 35%, 65% and 100%: the curve moves, its peak stays at 65%. That is a dominant strategy.

The trap, in four boxes

Big number: your profit. Small: each rival's. 100 = profit when nobody uses AI.

Source: Hemenway Falk & Tsoukalas, “The AI Layoff Trap”, arXiv 2603.20617 (v3, June 2026), Proposition 1. Parameters from the paper's illustrative case: AI costs 30% of a wage, workers spend half their income in town, 30% of lost income is replaced, integration friction k = 1.

Based on Hemenway Falk & Tsoukalas, “The AI Layoff Trap” (2026). A model, not a forecast. Models: Kenney (CC0).

The AILayoff Trap

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The AI
Layoff Trap